STEP: Improved Definition and Profiling for Sustainable Technology Parks Work Package 2: Regional Mapping

March 2012

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Research conducted by

Dr. Nigel Berkeley, Dr. David Jarvis, Dr. Jason Begley and Dr. Gideon Maas Coventry University, West Midlands, United Kingdom

Dr.-Ing. Jürgen Ude, Melanie Driesner and Udo Riedel IGZ, Saxony-Anhalt, Germany

Prof. Janusz Zaleski, Zbigniew Mogiła, Paweł Tomaszewski, Tomasz Korf , Gabriela Lisowiec and Małgorzata Wysocka WARR, Lower Silesia, Poland

This document was prepared as part of the project “Improved Definition and Profiling for Sustainable Technology Park – STEP”, which is implemented within the project DISTRICT+, co-funded by European Regional Development Fund (ERDF). Project STEP is implemented in accordance with the Partnership Agreement between the Innovations-und GrunderZentrum Magdeburg GmbH (IGZ), Coventry University and Wroclaw Regional Development Agency and in accordance with Subsidy Contract for the implementation of the INTERREG IVC DISTRICT+ sub-project signed on 19 March 2011 .

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Contents

Part One: West Midlands Regional Mapping Report

1.0 Introduction 005

2.0 Identifying the current technology park situation 010

3.0 Resume & overview of experiences from other projects 021

4.0 Regional mapping of the automotive cluster 039

References 064

Part Two: Saxony-Anhalt Regional Mapping Report

5.0 Identifying the current technology park situation 068

6.0 Resume and overview of experiences from other EU-Projects and current Project 081

7.0 Lessons and good practices from current projects 088 3 8.0 Automotive Supplier Industry in Saxony-Anhalt 097

Part Three: Lower Silesia Regional Mapping Report

9.0 Introduction 118

10.0 Overview of Lower Silesia Region 119

11.0 The current situation of technology and industrial parks 124

12.0 Resume and overview of experiences from other EU-Projects 146

13.0 Regional Mapping of the Automotive Industry 163

14.0 Conclusions 208

15.0 Bibliography 214

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Part One: West Midlands Regional Mapping Report

Dr Nigel Berkeley, Dr David Jarvis, Dr Jason Begley and Dr Gideon Maas Coventry University, United Kingdom

Coventry University Applied Research Centre in Sustainable Regeneration (SURGE) SURGE aims to support communities, practitioners and decision makers to achieve lasting change for society and the economy via a holistic and evidenced based approach to regeneration. www.coventry.ac.uk/surge

1.0 Introduction

This report has been prepared under Work Package 2 (WP2) of the INTERREG IVC DISTRICT+ sub-project „Improved Definition and Profiling for Sustainable Technology Parks (STEP)‟. Project Implementation is scheduled over a 24 month period from May 2011 to April 2013 and involves a transnational partnership of three regions: Saxony-Anhalt (Germany); Lower Silesia (Poland); and, the West Midlands (United Kingdom).

The main goals of the STEP project are as follows: a. To showcase the role played by virtual technology clusters in promoting the transformative shift of traditional industrial economies to more innovative and sustainable development pathways. b. To identify instruments, toolkits and methodologies to facilitate the creation of future orientated sustainable technology parks. c. To identify and analyse trends and developments in the field of electromobility and future oriented technology parks examining the role played by virtual and physical forms.

The methodology applied by all three partners in this work package comprised four key stages. These stages are captured on the key tasks diagram, Figure 1.1 below. 5

Figure 1.1: Work Package 2: Key Tasks

4 Brainstorming workshop 3 Regional Mapping 2 Resume and overview of experiences from other EU-Projects Identifying current technology park situation 1

Guidance on the fulfilments of tasks 1 to 3 was issued by SP2 (Coventry University) and, in more detail, requested that each partner consider the following issues in compiling a regional mapping report for their region.

1.1 Identifying the current technology park situation In identifying the current technology park situation in their region, partners were asked to map the physical locations of technology parks, profile their occupancy rates and resident companies by type and sector. Alongside this, it was suggested that partners investigate

technology park ownership arrangements and relationships with umbrella organisations, Universities and public authorities, the so called ‗triple-helix‘ that has been shown to be a key positive influence on exploitation of innovation and the growth and development of parks. In doing this, where data are publicly available, partners were also asked to consider the relative proportions of indigenous firms, foreign direct investors, spin out firms and start-up companies present.

1.2 Resume and overview of experiences from other EU-Projects The second key task under work package 2 involved the identification of lessons and good practice from partners‘ previous project experiences, including through other EU funded projects. These were to be grouped into two principal categories: (1) thematic lessons and; (2) practice lessons. Thematic lessons are concerned with sustainable technology park intelligence which might usefully be transferred between STEP partners, whilst practice lessons are related to methods of investigating the issue of Sustainable Technology Parks which could benefit the further development of the STEP project. Both sets of lessons were to be collated and carried forward to task 4 of the work package, an externally facilitated ‗brainstorming‘ workshop.

1.3 Regional Mapping of the Automotive Industry The third key task of work package 2 required partners to focus on the automotive sector 6 within their region and gather a set of intelligence which could be used to help inform and shape subsequent work package activity. The five individual components of this task were as follows:  To define and profile the regional automotive sector according to the NACE 34 classification and identify key local geographic concentrations of activity  To describe the characteristics of the sector in terms of its historical development, key firms, supply-chain linkages, current employment levels, workforce characteristics including skill levels, needs and shortages, contribution to regional GDP/GVA and market trends  To analyse the key drivers of change including the roles played by government and other key stakeholders (partnerships and networks), technology and markets  To use intelligence gathered through the activities above to analyse the strengths, weaknesses, opportunities and threats (SWOT) for the automotive industry in the region

 Identify and critically appraise the regional policy instruments already in place designed to facilitate a transformative shift towards the sustainability of the automotive cluster

1.4 Brainstorming Workshop The final task of work package 2 required partners to participate in a facilitated brainstorming workshop designed to isolate transferable good practices from the resume and overview of experiences from other EU-Projects conducted in task 2 (see 1.2 above). Findings from this session, held in Magdeberg on 12th October 2011, are captured in a separate synthesis report pulled together by Partner 2 (Coventry University).

Findings related to the West Midlands region for each of the first three workpackage tasks above are outlined in the remainder of this report. Before progressing onto the review of findings, however, it is useful first to ‗set the scene‘ by providing a brief socio-economic context for the region.

1.5 The West Midlands Region Geographically, the region extends from the Malvern Hills and Cotswolds in the south to the Peak District in the north. It is bounded by the Welsh border to the west and the East Midlands to the east (see Figure 1.2). 7

Figure 1.2: The West Midlands Region

The population of the region stands at 5.43 million, 43% of whom live in urban conurbations, yet 80% of the land area can be described as rural in character. In the centre of the region, is the UK‘s second largest conurbation connecting Birmingham, the Black Country and Coventry (home to the automotive and engineering industries). A second, smaller conurbation, the Potteries, lies to the north of the region (home to the ceramics industry). The region occupies a central position in England and covers approximately 13000 square kilometres comprising Herefordshire, Worcestershire, Shropshire, Staffordshire and Warwickshire, as well as seven Metropolitan boroughs: Birmingham, Coventry, Dudley, Sandwell, Solihull, Walsall and Wolverhampton (Green and Berkeley, 2006).

The regional economy is long-founded on manufacturing and a number of distinctive products that defined its cities. For example, Birmingham became famous for guns, buttons, toys, trinkets, jewellery and the motor industry; the Black Country for coal mining, bicycles, cars, armaments, machine tools and aero engines. Coventry produced watches, sewing machines, bicycles, motorcycles, aero engines, tractors, machine tools and cars; while the potteries made china, earthenware, bricks, tiles and pipes (Green and Berkeley, 2006). Perhaps the most telling economic event to have defined the West Midlands over the last number of decades has been the enormous decline in manufacturing jobs, a sector that nevertheless still provides significant employment (Table 1.1). 8 Table 1.1: West Midlands Employment Structure 1971-2008

1971 2008 Sector No. % No. % Agriculture and fishing 62,229 2.8 24,280 1.0 Energy and water 31,737 1.4 13,442 0.6 Manufacturing 1,103,859 50.0 324,560 13.8 Construction 103,721 4.7 114,768 4.9 Distribution, hotels and restaurants 220,533 10.0 556,449 23.6 Transport, communication, finance, insurance 414,832 18.8 576,432 24.5 Public administration, education & health 114,321 5.2 636,885 27.0 Other services 155,346 7.0 108,534 4.6 Total 2,206,578 100.0 2,355,350 100.0 Source: Annual Business Inquiry, NOMIS

This decline in manufacturing employment has been offset by a corresponding rise in services, greatly altering the economic structure of the region in the last three to four decades. Table 1.2 offers a breakdown of the most prominent industries and services currently in operation in the region in terms of GVA and employment. As can be seen, a significant proportion of regional GVA and jobs are concentrated in the public sector and

relatively low value added private sector activities. Whilst new and emerging high-value activities are prominent, at present they play a relatively minor role, making further investment essential to rebalancing the regional economy and to future prosperity.

Table 1.2: West Midlands Industrial Structure: GVA and Employment Sector/Cluster Industry / service Emerging high value added private Environmental technologies (£3bn GVA, 74,000 jobs) sector activities Medical technologies (£250m GVA, 7,000 jobs) Specialist business services (£5bn GVA) Digital media (£150m GVA, 9,500 jobs) Electricity, gas and water (£2bn GVA, 14,000 jobs) Traditional private sector activities Transport technologies (£4bn GVA, 92,000 jobs) Building technologies (£11bn GVA, 220,000 jobs) Food and drink (£3bn GVA, 58,000 jobs) Lower value added private sector Business services (£23bn GVA, 440,000 jobs) activities Wholesale and retail (£12bn GVA, 360,000 jobs) Public Sector activities Education (£6bn GVA, 240,000 jobs) Health and social care (£7bn GVA, 277,000 jobs) Source: West Midlands Regional Observatory (2010a)

In GVA and employment terms the region lags behind the national average (Figure 1.3). Weak industrial structure has been further inhibited by a significant slowdown in growth in the aftermath of the 2008/2009 recession. Growth in the region had lagged prior to the 9 financial downturn (2% growth in the region compared to a UK average of 19% from 1998- 2008), but with a dependence on low value-added sectors with low skill levels and poor productivity, the ability of the region to make a full recovery from recession remains questionable. Output per head in the region is just 89% of the UK average, equating to a £16.5 billion output gap that has widened year on year since 1995 when it was £4 billion.

Figure 1.3: Regional Economic Performance (GVA per head)

£22,000

£20,000

£18,000

£16,000 West Midlands England £14,000

£12,000

£10,000 2002 2003 2004 2005 2006 2007

Source: West Midlands Regional Observatory (2010b)

2.0 Identifying the current technology park situation

2.1 Overview of West Midlands Science and Technology Parks The West Midlands region is currently home to eight science/technology parks. Table 2.1 presents an overview of their key characteristics and highlights that:  The majority of Parks are located within the urban core of the region, in Birmingham, Coventry and Wolverhampton  The first Science Park in the Region, Birmingham Science Park Aston, was established in 1982 occupying a former iron foundry site in inner-city Birmingham  Further developments have occurred on greenfield as well as brownfield sites with the most recent, Longbridge, opening in 2007 on land long associated with the automotive industry  All but two of the Parks are joint ventures, typically between a University and Local Authority (Birmingham Research Park, Coventry, Warwick and Wolverhampton) or between different Local Authorities (Malvern). Longbridge represents the only private-led development, whilst Aston (Birmingham City Council) and Keele (Keele University) are wholly owned  Science Parks vary enormously in size from 32,000 square metres to 170,000 10 square metres. This is reflected in the number of tenant companies which ranges from 14 to well over 100.  All but two of the Science Parks have ‗host‘ Universities and have well developed links with academics and facilities as well as providing space for spin-out and start-up activity. Malvern Hills is a notable exception, being established as a military research facility  Key sectors of tenant companies are a reflection of host institution specialisms, local/regional strengths and the shift toward high value, knowledge-based activities. Only Coventry University Technology Park has any particular automotive specialism although this situation is changing with two new Parks opening in the region (see below)

All Parks provide a range of accommodation in multiple buildings, providing space for new, existing and growing companies. Shared services are also a common feature and include: meeting and conference space, IT, office services, business development and business support, and access to University staff and facilities (see 2.2 to 2.8 for more details).

Table 2.1: Key characteristics of West Midlands Region Science/Technology Parks (Source: UK Science Park Association)

Links to Land Park Size No. of Technology Park Established Ownership Higher Key Sectors Development (sq/m) Tenants Education 14 Birmingham Research University of Greenfield 1986 Joint Venture 32,000 Health Park Birmingham

Birmingham Science Digital, ICT, Medical and Brownfield 1982 Wholly owned 56,700 90+ Aston University Park Aston Clean technologies

Automotive design and Coventry University Coventry consultancy, IT and software Brownfield 1998 Joint Venture 81,000 65 Technology Park University development, creative media, business consultancy Keele University Chemistry and biology; digital Science and Business Greenfield 1987 Wholly owned 50+ Keele University and media Park, Staffordshire

Longbridge Technology R&D links with Brownfield 2007 Joint Venture 162,000 42 University of IT, media and software Park, Birmingham Birmingham

QuinetiQ former Home for companies wanting Malvern Hills Science Defense to exploit QuinetiQ lead in Greenfield 1999 Joint Venture 40,500 30 Evaluation technologies developed for , Worcestershire Park Research military applications but with Agency potential commercial spin-out

IT, digital media, medical and 170,000 11 University of Warwick University of healthcare, environmental Greenfield 1984 Joint Venture excluding 140 Warwick technologies, high-value Science Park, Coventry satellite sites manufacturing

Wolverhampton Science University of Technology, knowledge-based Brownfield 1993 Joint Venture 100 Park Wolverhampton and creative industries

2.2 Birmingham Research Park Birmingham Research Park was established in 1986 as a joint venture between the University of Birmingham and Birmingham City Council. Its initial aim was to stimulate economic development and employment in Birmingham, recognising the need to diversify activity away from traditional sectors that were, and which continue to be affected adversely by de-industrialisation and globalisation. The Park offered an opportunity for new and developing small firms to locate alongside and benefit from research and technical expertise, especially in medical and dental sciences, as well as benefit from University facilities.

Web address: www.brpl.bham.ac.uk

Location: Edgbaston, Birmingham

Brownfield/Greenfield: Greenfield

Date of Establishment: 1986

Ownership: Joint Venture: University of Birmingham and Birmingham City Council Partners: University of Birmingham and Birmingham City Council 12 Park Size: 8 acre site (32,00 sq/m) featuring: Institute of R&D (4,180 sq/m) and ICT Centre (1,020 sq/m) Shared Services: Office services; business advice; access to university services

Links to HE: Home to several spin-out companies (originally established as a base for Technology Transfer) Tenant companies 14 Tenants [14.03.2011]

Occupancy rate:

Key sectors: All health research or support services - linked to University of Birmingham College of Medical and Dental sciences

The Park occupies 32,000 square metres of greenfield land and encompasses an Institute of Research & Development (4,180 sq/m) with units for rent by small companies, and an ICT Centre (1,020 sq/m) for small IT based firms. Many of the companies located on the Park originate from the University with a notable number of spin-out firms. Office services are available to tenant companies as well a programme of initial business advice and access to University services and facilities.

2.3 Birmingham Science Park (Aston) Birmingham Science Park Aston (BSPA) was founded in 1982 and occupies 56,700 square metres of inner-city land in Birmingham, previously the site of an iron foundry. Wholly owned by Birmingham City Council it seeks to ‗drive innovation-led regeneration within the city and the region‘ (BSPA, 2011). The Park caters for founders of new businesses as well as established and growing firms, and currently hosts 0er 90 companies in ICT, digital, medical and clean technologies in units ranging from 11 sq/m to 1,400 sq/m. In 2009 BSPA opened the ‗Entrepreneurs for the Future‘ Centre to promote high-technology business, stimulate economic development and retain high calibre graduates in the region.

Web address: www.bsp-a.com

Location: Aston, Birmingham

Brownfield/Greenfield: Brownfield (previously the site of an iron foundry)

Date of Establishment: 1982

Ownership: Birmingham City Council

Partners: None 13

Park Size: 14 acre campus with 11 to 1,400 sq/m business units

Shared Services: IT provision inc. free MS software for start-ups; 24hr security; onsite meeting and conference facilities; business development support; dedicated park broadband service; access to University resources including graduate recruitment and the library; Photonics R&D facility Links to HE: Aston University (particularly Aston Business School)

Tenant companies In excess of 90

Occupancy rate:

Key sectors: Focus on business incubation with four key sectors: Digital; IT; Meditech; and Cleantech

Tenants can access a range of services including IT support services, conference and meeting facilities, business development and support and access to resources at Aston University. As well as the library, this includes links to the Business School to facilitate access to staff and students.

2.4 Coventry University Technology Park Coventry University Technology Park was established in 1998 on a 20 acre brownfield site on the edge of Coventry City Centre, the former home of Rolls Royce aero engines. A collaboration between Coventry University, Coventry City Council and the former Regional Development Agency, Advantage West Midlands, it comprises five property developments providing units for start-ups, grow-on businesses as well as those requiring ‗own-front door‘ accommodation. Coventry University‘s Applied Research Institutes/Centres, as well as its commercial trading arm CUE Ltd., are also located on the Park to foster collaborative working in new product development, research & training. The Park is now home to 65 firms in sectors such as automotive design, software development; and creative media.

Web address: www.coventry.ac.uk/cutp

Location: Parkside, Coventry

Brownfield/Greenfield: Brownfield (previously the site of a Rolls Royce aero engine factory) Date of Establishment: 1998

Ownership: Joint Venture between Coventry University, Coventry City Council and Advantage West Midlands 14 Partners: Coventry University; Coventry City Council; Advantage West Midlands; Government Office for the West Midlands; European Commission; BT Park Size: 20 acre site (81,000 sq/m) comprising 17.3 sq/m to 230 sq/m units across five main assets: Conference Centre; Innovation Centre; Enterprise Centre; Design Hub; Innovation Village. Shared Services: Telephony and data services; High-speed IT networks; free meeting rooms; conference, workshop and testing facilities; social break-out zone; business support and advice; complimentary access to University library facilities Links to HE: Coventry University

Tenant companies 65

Occupancy rate:

Key sectors: Automotive design and consultancy; IT and software development; creative media; business consultancy

The Park offers a range of office management services as well as extensive business support and advice through the University‘s Institute of Applied Entrepreneurship.

2.5 Keele University Science and Business Park Keele University Science & Business Park opened in 1987 on greenfield land in North Staffordshire. It is wholly owned by Keele University with a key role to support the growth of innovative R&D focused businesses and is designated as a cluster site for technology and health care related firms. The Park provides 14,000 square metres of mixed-use business accommodation including office units, laboratories and workshops. Across three Innovation Centres the Park caters for start-ups, spin-outs, and expanding or relocating businesses. A fourth Innovation Centre provides dedicated space and state-of-the-art facilities and laboratory space for medical technology firms. The Park‘s sectoral profile links directly to the key research strengths of the host University and tenants have access to all facilities as well as facilitated links to research expertise and student/graduate placements through a business support team.

Web address: www.kusp.co.uk

Location: Keele, Staffordshire

Brownfield/Greenfield: Greenfield

Date of Establishment: 1987 15 Ownership: Wholly owned by Keele University

Partners: Pochin's PLC (Joint venture for later phases of development) accessing funding from EU RECHAR and UK SRB Park Size: Part of 617 acre (2.5 million sq/m) Keele University Campus site (14,000 sq/m of mixed used accommodation). Shared Services: Meeting rooms with multi-media; on-site business support and facilities management; on-site office administration and catering; financial advice and support; PR, marketing and media support; Access to all academic, research, commercial, media, social and sports facilities on campus; business support management team to link tenant companies with academics and HE research Links to HE: Part of Keele University campus

Tenant companies In excess of 50

Occupancy rate:

Key sectors: Key focus on bio-technology, medical, digital and media

2.6 Longbridge Technology Park Longbridge Technology Park is part of an ambitious £1 billion plan to regenerate an iconic brownfield site in Birmingham. Longbridge was the birthplace of the Mini and most recently home to MG Rover. The scheme to transform the site has been brought forward by St Modwen Properties PLC and Advantage West Midlands and the 162,000 square metre Technology Park is the first key development. It houses an Innovation Centre providing a variety of accommodation for start-ups and growing technology-based firms, and ‗Two Devon Way‘ a facility providing grow-on space for expanding firms. A third building, ‗Three Devon Way‘, will provide a further 2,300 square metres of accommodation. Occupiers reflect the technology-based vision being concentrated in IT, media and software sectors.

Web address: www.longbridgetechnologypark.co.uk

Location: Longbridge, Birmingham

Brownfield/Greenfield: Brownfield (previously the site of an MG Rover car factory)

Date of Establishment: 2007

Ownership: Partnership between St Modwen Properties PLC and Advantage West Midlands 16 Partners: St Modwen Properties PLC and Advantage West Midlands

Park Size: 40 acre (162,000 sq/m) site currently featuring an Innovation Centre (4,200 sq/m) and ‗Two Devon Way‘ building (2,900 sq/m) Shared Services: Conference and meeting suites; multimedia facilities; dedicated business support team Links to HE: Research and technology linkages with University of Birmingham Tenant companies 42

Occupancy rate:

Key sectors: IT, media and software

The Park provides a full range of office and business support services and, although it is not directly linked to a University, it offers tenants access to, and support from, the University of Birmingham.

2.7 Malvern Hills Science Park Malvern Hills Science Park opened in October 1999 on a 40,500 square metre Greenfield site in Worcestershire. It is a joint venture between Malvern Hills District Council, Worcestershire County Council and Herefordshire and Worcestershire Chamber of Commerce. The Park is strategically located adjacent to QinetiQ (the former Defence Evaluation Research Agency) enabling access to world leading technology and research expertise and facilities. The Park provides space for the growth of high-tech companies seeking to exploit QinetiQ‘s expertise in military technologies, especially sensors, electronics and communications. Three buildings, the Innovation Centre, the Regional Technology Exchange and ‗Phase 3‘ provide some 54 mixed-use units as well as laboratories and conference facilities. Computer science, nanotechnologies and forensic science are key specialisms.

Web address: www.mhsp.co.uk

Location: Malvern, Worcestershire

Brownfield/Greenfield: Greenfield

Date of Establishment: 1999 17 Ownership: Malvern Hills District Council; Worcestershire County Council; Herefordshire and Worcestershire Chamber of Commerce Partners: QinetiQ; Advantage West Midlands; Government Office for the West Midlands Park Size: 10 acres (40,500 sq/m) Innovation Centre, 23 units (1,902 sq/m), Regional Technology Exchange, 12 units (1,200 sq/m), and Phase 3, 21 units (3,200 sq/m) Shared Services: Shared reception and back office facilities; conference rooms and video conferencing facilities; facilities management Links to HE: Linkages to QinetiQ (the former Defence Evaluation Research Agency) Tenant companies 30

Occupancy rate:

Key sectors: Pure science and computing science specialisms. Established to provide a home for companies wanting to exploit QinetiQ‘s lead in technologies developed mainly for military applications but with potential commercial spin-out.

2.8 University of Warwick Science Park University of Warwick Science Park opened its first building in 1984. Since then, the Park has grown through provision of some 19 additional buildings on the main 42 acre site, as well as through development of three satellite business incubator facilities at other remote locations in Coventry, Warwick and Solihull. These facilities provide over 50,000 square metres of dedicated space in units which range in size from 20 square metres to 3,700 square metres. The Park is currently home to over 140 businesses at all stages of growth, and which benefit from a long established in-house business support team able to provide advice and guidance in the three areas of finance, markets and knowledge transfer. Two fifths of the companies located on the Park are involved in ICT, a concentration of activity that has remained relatively constant for many years.

Web address: www.warwicksciencepark.co.uk

Location: Coventry

Brownfield/Greenfield: Greenfield

Date of Establishment: 1984

Ownership: Limited Liability Company with the following shareholders: 18 University of Warwick; Coventry City Council; Warwickshire County Council; West Midlands Enterprise Ltd. Partners: University of Warwick; Coventry City Council; Warwickshire County Council; West Midlands Enterprise Ltd. Park Size: The main site is 42 acres. In addition there are three satellite sites: (1) Warwick Innovation Centre on Warwick technology park, Warwick; (2) Business Innovation Centre on Binley Business Park, Coventry [Both 1 & 2 are intended to provide grow on space]; and (3) Blythe Valley Innovation Centre on Blythe Valley Business Park, Solihull [a grow on space for ICT firms]. Shared Services: Reception and telephone answering services; meeting rooms; dedicated ‗Warwick-net‘ broadband; business support team Links to HE: Located alongside the main University of Warwick campus

Tenant companies 140+

Occupancy rate:

Key sectors: IT; digital media; medical and healthcare; social care; environmental technologies; high-value manufacturing

2.9 Wolverhampton Science Park Wolverhampton Science Park was formed in 1993 as a Private Limited Company through a partnership between the University of Wolverhampton and Wolverhampton City Council. The first phase, some 2,800 square metres of serviced office accommodation across a ‗Technology Centre‘ and ‗Development Centre‘ was completed in 1995 with funding support from the European Regional Development Fund and UK Government‘s ‗City Challenge‘ programme. Further phases of development, including dedicated provision for firms in the creative industries sector, have increased the total amount of floor space available to new- start and expanding technology and knowledge based companies to over 9,000 square metres. Alongside business units, the growth of the Park has seen construction of conference and meeting facilities for the use of tenants and outside companies.

Web address: www.wolverhamptonsp.co.uk

Location: Wolverhampton

Brownfield/Greenfield: Brownfield

Date of Establishment: 1995

Ownership: Limited company involving University of Wolverhampton and 19 Wolverhampton City Council Partners: University of Wolverhampton and Wolverhampton City Council

Park Size:  Phase 1 = 2,800 sq/metre Technology Centre  Phase 2 = 2,800 sq/metre extension incorporating laboratory space)  2002 saw work begin on Phase 3, a 4,000 sq/metre Creative Industries centre for inward investors.  A further 2,800 sq/metres are planned for phase 4. Shared Services: Conference and meeting facilities; integrated management team; business support through University of Wolverhampton; on-site business surgery facility which brings in outside experts Links to HE: Business support for tenant companies through University of Wolverhampton, and University run innovation centre which helps companies to develop their concepts Tenant companies At least 50

Occupancy rate:

Key sectors: Media; IT; communications; creative arts

2.10 Future developments The Technology Park landscape in the region has been enhanced in 2011 with the opening of one new Park, at Coventry‘s Ansty Business Park, and the announcement of another, MIRA Technology Park, near Nuneaton in North Warwickshire. Both have an explicit automotive focus and so warrant further elaboration here.

2.10.1 Ansty Park Manufacturing Technology Centre The Manufacturing Technology Centre (MTC) at Ansty Park is the outcome of a £40.55 million investment by the former Regional Development Agency, Advantage West Midlands. Housed in a purpose built 12,000 square metre facility, MTC is located at the heart of a developing R&D technology park. It will focus on assembly, fabrication and joining technologies, and will act as a bridge between university development and testing and full production. From the outset, the centre has involved four research partners (University of Birmingham, The University of Nottingham, Loughborough University and TWI Limited) alongside key industry players (Rolls Royce aero engines, Airbus UK, Aero Engine Controls and Hewlet Packard).

2.10.2 MIRA Technology Park Evolving plans for MIRA Technology Park involve the redevelopment of 87.5 hectare 20 campus of the Motor Industry Research Association. The vision for the new park is to create a centre of excellence linked to the specialist technologies and testing facilities which MIRA currently operates, stimulating the growth of a world-class centre of automotive and transport research and engineering and creating a platform for the rapid delivery of bespoke R&D centres ranging from start-up facilities to major European R&D operations. The new MIRA Engineering Centre (MEC) will be the flagship building and centrepiece of the MIRA Technology Park.

3.0 Resume & overview of experiences from other projects

This section of the report focuses on the identification of best practice from projects that enabled diversification and growth in the West Midlands region. Within this broad focus, three specific sub-objectives were tackled:

 To review West Midlands business support projects that have supported economic diversification and growth for SMEs engaged either currently or historically within the automotive sector.  To review projects in the area of cluster development, innovation support, and business incubation/science and technology park development.  To review locally delivered projects which may have been regionally or locally funded.

Given the number of projects that have been developed and implemented within the West Midlands region in recent years, to analyse them all would be a cumbersome task. Therefore, projects were identified whose data was readily available through secondary sources. These projects are discussed in sections 3.1 to 3.4 with the aim of highlighting examples of best practice. Deduced from these discussions, a final list of ten guidelines to best practices is presented in section 3.5. 21

3.1 Cluster Development with Specific Focus on the Automotive Cluster The West Midlands hosted and still hosts several programmes and projects aimed at stimulating growth and investment in the region. These are discussed in the following paragraphs.

3.1.1 Accelerate The Accelerate project ran from 1996 to 2010 and focused on business support for the automotive supply chain in the West Midlands. It aimed to support component manufacturers become more competitive in the global automotive market.

An initial objective was to address shop floor improvements (QCD) by promoting the use of waste reduction and lean manufacturing tools (MacNeil and Liu, 2003). Since the start of the project over 130 Million Euros have been dispersed on the following areas:  Business Development Grants – 1:1 subsidised consultancy support.  Capital Grants – relatively small sums to support equipment purchase.

 Supply Chain Networks – groups of companies that form ‗supply chains‘ seeking to improve trading interactions.  Networks for Change – groups of companies that take on a collective improvement programme.  Seminars from Specialist Centres – for example technology centres in automotive companies, consultancies.

The programme concentrated exclusively on processes making parts cheaper, quicker and better rather than on the development of new technologies.

3.1.2 Ansty Park: Manufacturing Technology Centre The Manufacturing Technology Centre (MTC), based on Ansty Park near Coventry, is home to a collaborative partnership between industry, universities and R&D organisations with its role being to support UK manufacturing companies improve their competitiveness. The MTC received public funding totalling £40.5 million and opened in the summer of 2011. It will concentrate on assembly, fabrication and joining technologies, as well as acting as a bridge between university development and testing work and full production businesses. Universities involved include the University of Birmingham and the University of Nottingham. To date MTC has been successful in recruiting high profile industrial partners including 22 Rolls-Royce, Jaguar Land Rover, and Airbus to the Park which could be pivotal to the success of the venture.

3.1.3 Manufacturing Advisory Service The Manufacturing Advisory Service (MAS) is a Government run project jointly funded by the Department of Business Innovation and Skills (BIS) and the European Regional Development Fund (ERDF). Its mission locally is to be the instinctive choice for advice, support and business solutions in the West Midlands and has a clear vision for the future namely:

 Client focused, consistently achieving exceptional levels of customer satisfaction.  Renowned provider of superior, quantifiable business improvements.  Acknowledged as the UK‘s leading provider of value-for-money business support to SME manufacturers.  Continually develop services to provide the most appropriate support to clients.  Providing a challenging and supportive environment in which people are motivated to succeed.

 Developing sustainable, mutually beneficial partnerships with key clients, funding bodies and suppliers.

MAS-WM states that it is dedicated to making a difference to manufacturing in the region with areas such as advanced manufacturing, low carbon technologies and innovation being high on the agenda. To achieve this they offer the following:

 Immediate impartial manufacturing advice.  In-company manufacturing reviews to highlight performance enhancing opportunities.  A series of free to attend interactive best practice workshops that cover manufacturing, purchasing and international marketing and organised company visits.  Subsidised in-depth project support to resolve complex manufacturing issues.  Access to technical expertise and sources of additional support.

A case study of Bevan illustrates the added-value of MAS‘s service. Bevan, employing 160 people across the West Midlands, is a leading supplier of commercial vehicle bodies. They offer a comprehensive commercial vehicle build, repair, and maintenance service to logistics operations across the whole of the UK and have been working closely with the MAS for a 23 number of years on a series of business improvement processes of which the Bevan 21 resulted (MAS, 2011). Bevan 21 brought through a major innovation in rigid body styling, with improved aerodynamics to reduce wind slip resistance and drag, while also creating a distinctive modern outline. Through independent track trials, the body was 15 per cent more fuel efficient than a truck with a standard box body. Lee Dimmock, Operations Director at Bevan stated, ―Working with the Manufacturing Advisory Service-West Midlands, our in- house team spent hundreds of hours developing the aerodynamic frame that gives the Bevan 21 such unique performance‖ (MAS, 2011).

3.1.4 Niche vehicle Network The Niche Vehicle Network was set up in 2005, and it is an independent association of over 100 niche vehicle manufacturers, specialist technology companies and supply chain. The West Midlands hosts many niche vehicle producers including companies such as Aston Martin, Morgan and Westfield, along with specialists in the electric vehicle sector such as Zytec. One of the reasons why the network was set up was to explore and address the needs that could be met collectively such as research and development and marketing. The Niche Vehicle Research and Development Programme has been the catalyst for over 104

different business collaborations and has assisted the development of nine prototype vehicles and three process improvement projects. An example is the E Vito Taxi Project which brought together a consortium of engineering companies including Zytek and Penso to produce an electric taxi that can transport six people over a 75 mile range from a single charge (Niche Vehicle Network, 2011).

3.1.5 Warwick (University) Manufacturing Group Warwick (University) Manufacturing group (WMG), was initially established in 1980 and is an international group, with collaborative centres in the UK, India, China, Malaysia, Russia, Singapore and Thailand. The aim of WMG is to improve competitiveness through the application of value adding innovation, new technologies and skills deployment. By way of illustration, the Low Carbon Technology Project (led by WMG) is funded by Advantage West Midlands, the European Regional Development Fund and industry partners. It aims to safeguard jobs in the region‘s supply chain as businesses switch to low carbon opportunities and make the West Midlands the global leader of excellence in low carbon vehicle engineering. The project has several iconic companies supporting it including TATA Motors, Jaguar Land Rover, and MIRA LTD researching into vehicle dynamics, aerodynamic performance, energy storage and recovery.

24 3.1.6 i-UEN The Innovation University Enterprise Network (i-UEN) commenced on 1 June 2011. i-UEN is a project that will support growth businesses based within the West Midlands in creating, developing and implementing new opportunities through open innovation. Coventry University Enterprises Ltd (CUE Ltd.) is delivering on the project and acting as a knowledge broker to transfer information on the skills, processes and technologies required by growth businesses to support product, service and process development within open innovation environments. The project will look at trends in open innovation, how to build an open innovation culture within an organisation and support SME‘s in setting up open innovation procedures. It is specifically designed so that large enterprises and SME‘s can accelerate and increase the effectiveness of their innovation process as well as supporting large enterprises to drive up demand for their services and products through targeted collaborations. In terms of the automotive cluster this project is specifically focused on niche markets. Although this is a relatively new project it builds on networks already established and the intelligence generated through them to facilitate effective knowledge transfer.

3.1.7 Ultra Low Carbon Vehicle Demonstrator Projects In 2009 the UK Government announced the winners of the Technology Strategy Board‘s (TSB) Ultra Low Carbon Vehicle Demonstrator competition which had a total fund of £25 million. Winning consortia brought together manufacturers, energy supply companies, Regional Development Agencies, public authorities and academic institutions to launch projects in eight regions of the UK. These include

 Coventry and Birmingham Low Emission Demonstrators (CABLED)  Electric Vehicle Accelerated Development in the North East (EVADINE)  Ford Focus Battery Electric Vehicle  London South East Bid  MINI E Research Project  The Allied Vehicles Project  PHV – Paving the way to full commercialisation of plug-in hybrid vehicles  EEMS Accelerate

Coventry University is part of the CABLED consortium running the UK‘s largest test of privately-owned low carbon vehicles (2009-2012). The primary aim of the project is to show that ultra low carbon vehicles are now a practical alternative to conventional cars in urban 25 environments. Key objectives include:

 Delivering a showcase demonstration of 110 ultra low carbon vehicles across Birmingham and Coventry and the wider West Midlands. These are a cross-section of vehicles - 2 seater, 4 seater and SUVs - powered using battery electric, hydrogen fuel-cell, plug-in hybrid and induction charging technology.  Delivering the infrastructure required both in the users' property, in workplaces, and in public areas.  Recruiting a range of users from a diverse socio-economic background to test the applicability and functionality of low carbon vehicles in urban environments.  Providing extended real world vehicle evaluation and usage data to allow final development and hence ensure successful production launch of ultra low carbon vehicles.  Collecting data to measure vehicle performance, infrastructure usage patterns, impacts and requirements with a minimum 12 months experience of seasonal conditions from all vehicles.

 Publicising and disseminating good practice and lessons learned to a wider audience.

Coventry University were responsible for driver recruitment, for designing, producing and deploying 8 hydrogen fuelled vehicles and installing a hydrogen fuel station. In addition to this, Coventry University has committed to install 30+ electric charging points.

3.1.8 Discussion Various observations can be deduced from the discussions in the previous sub-paragraphs. One key observation is that collaboration seems to be a critical element in all programmes and that it manifests itself in different forms such as formal networking, providing of advice and research and development activities. This collaboration combined with the availability of various higher education institutions specialising on the automotive cluster provides an excellent and strong basis for the growth and diversification of the automotive cluster. Within a fast changing global environment growth, diversification alone would probably not be enough to create successes. A focused approach, opposed to a generalist approach with no real competitive edge, would enhance a business‘s ability to operate successfully in such a fast changing environment. Therefore, the increased focus of the automotive cluster on specific important trends such as low carbon vehicles and niche vehicle production provide a 26 further input into the strengthening of growth and diversification in the automotive cluster.

Deduced from discussions in paragraphs 3.1.1 to 3.1.7, best practices can be summarised as:

 The availability of networks assisting businesses to collaborate over a wide range of activities;  The transfer of knowledge on best practices through various means such as workshops or more one-to-one support by consultants and mentors;  The active involvement of businesses in innovation through financial or other more general support; and  The focus on focused innovation through activities specifically aimed at precisely defined sectors or even specific activities such as making parts cheaper.

3.2 Innovation Projects To remain competitive in increasingly uncertain and changing environment businesses need to move beyond their core competencies. Whilst the proportion of West Midlands firms that

are considered 'innovation active' is in line with the United Kingdom average, investment in both internal and external R&D as a proportion of total expenditure (19% and 5% respectively) is well below the UK average (31% and 11%). This positions the region as the lowest internal R&D investor among English regions and the 2nd lowest relating to external R&D expenditure. A positive view comes from Bailey (2010) who indicated that with the high level of manufacturing in the region, the West Midlands scores fairly highly on the European Innovation Scoreboard standing as the 42nd most innovative region. Against this background specific programmes promoting innovation is discussed in this section.

3.2.1 Innovation Networks Advantage West Midlands (AWM) initiated the Innovation Networks project during 2002 to boost innovation through finance and skills development. Within this project three or more West Midlands businesses could apply for revenue grants of £10,000 to help smooth the route to market of a new product, process or service.

The Innovation Networks service has funded 158 business networks in the West Midlands since its inception in 2002, supporting projects worth a combined £3.9m. In their report Regenesis Consulting Ltd (2007) suggested that ―Innovation Networks‘ most notable economic contribution may have been allowing businesses to pursue development 27 processes that would otherwise have been unviable, rather than directly leading to commercial success and new job creation‖. Through this project a more positive culture of innovation has been developed. In addition, other impacts of the project ranged from assisting firms to adapt flexibly to client demands and to keep up with competitors (Regenesis Consulting Ltd, 2007).

3.2.2 Innovation Vouchers Innovation Vouchers is a unique demand-led innovation voucher scheme that invites SMEs to apply for a £3000 voucher to purchase academic support from any of the thirteen universities in the West Midlands. The vouchers are not only available for technology-led innovation but can also be used for the management of the innovation process such as finding effective and efficient savings. The scheme prioritises applications in Health and Medical Technologies, Environment/Energy, New Materials, Digital Media and Transport.

In the case of Aeristech Ltd, a company who develops proprietary electric turbocharger systems and high-performance electric motors for engines and compressor applications, the voucher was used to provide assistance with automotive electronics, Electronic Control Unit

(ECU) programming and control strategy to find one or more simple and effective ways to interface with the engine‘s ECU. Birmingham City University provided the feasibility of using Sliding Mode Control, and they are now able to follow on from current customer demonstrations projects (Innovation Vouchers, 2010).

3.2.3 Shorter Knowledge Transfer Partnerships This is a collaborative scheme that aims to meet a specific business need or solve a specific problem of tactical or strategic importance for a business. Background information on the Shorter KTP is as follows:

 Deliver Knowledge Transfer Partnerships of between 10 and 40 weeks duration.  Each partnership will be formed by a regional company, regional university and qualified associate to deliver a specifically defined knowledge transfer project.  The project is managed by Coventry University Enterprises and delivered in partnership with Technology Strategy Board and Wolverhampton University with collaboration from other West Midlands‘ universities.

One of the main benefits of Shorter KTPs (SKTP‘s) is the reduction in cost of utilising the expert knowledge of graduate and associated academic expertise as well as helping the 28 business to achieve high impact deliverables in a shorter time frame. Some 60% of the actual cost of the SKTP is subsidised by Government leaving the SME to find £380 per week (Napier, 2011). SKTP‘s have several benefits namely:

 Accessing highly qualified people to spearhead new projects.  Accessing experts who can help take organisations forward.  Developing innovative solutions to help organisations grow.

3.2.4 Business Link WM Business Link WM is an online resource aimed at businesses ranging from sole traders to large organisations that provides essential information, signposting, advice and other support services. Since November 2011, the support available through the site has been delivered in a more interactive way rather than through face-to-face contact. To enable this to work effectively the website has had additional information and support content added to it, as well as providing new case studies and best practice examples on a range of topics.

3.2.5 Innovation Advisory Service The Innovation Advisory Service (IAS) is a free, expert advice service from Business Link WM which is designed to assist SMEs to engage in innovation. Working alongside innovation experts and advisors IAS provides support to assist in the generation, development and commercialisation of ideas for new products and processes. With a budget of £3.1million the Service intends to support over 200 companies, and in doing so creating and safeguarding jobs, increasing regional sales and establishing more than 30 knowledge based collaborations with local universities and R&D organisations (AWM, 2010).

3.2.6 Discussion Against the background of below par investment in R&D in the West Midlands, it is not surprising to find a strong focus on innovation within this region. In general, it can be seen that innovation focused programmes add value by providing real time / real world support and assistance, and in addressing the various phases of business development i.e. there is support for businesses in the concept development phase of innovation as well as those in the commercialisation phase. However, a major negative, common to many publicly funded support programmes, is the time span that support [funding] is available for. Most programmes are short-term in nature – three years or less – meaning that the extent to which lasting and sustainable impacts can be achieved is questionable. Given that 29 innovation is a mental and a physical activity it can be argued that support is needed over longer periods of time to have a sustainable impact on innovation culture within a region. Moreover, merely replacing face-to-face involvement with a website to ensure continuity is not sufficient for an environment where the levels of innovation are not high enough to ensure momentum of innovative behaviour.

Deduced from discussions in paragraphs 3.2.1 to 3.2.5, best practices can be summarised as:

 Provision of finance in various formats to suit the needs of businesses within specific phases e.g. grants to support commercialisation of innovative projects.  Provision of skills development to enhance innovation.  A focused approach to projects e.g. targeting specific sectors such as assistive technologies.  Providing initial ―energy‖ for businesses to get involved in innovation – whether innovation will be a natural phenomenon within a region where investments in research and development is below average is debatable.

 The active encouragement of collaboration/networking.  Input of experts, who otherwise would not be affordable by many businesses, available at a discounted rate.  Face-to-face interactions between experts and businesses allowing for the smoother transfer of new ideas into commercially viable products and services.

3.3 Science / Technology Parks and Business Incubation [For a fuller discussion of the regional technology park situation refer back to section 2.0 of this report] Analysis of Science and Technology Parks in the West Midlands Region reveals that most have similar aims, for example: to create collaboration between local and national companies; to support innovation from end-to-end; and to spearhead research and development on specific areas. They also provide business incubation support services in line with international trends such as advice and infrastructure in the form of access to laboratories and offices. In the West Midlands the number of Science / Technology Parks will increase to ten by 2012, providing companies of all sizes the environment to succeed in business.

Deduced from discussions in this section, best practices can be summarised as:

30  The close collaboration between the private sector, public sector and the third sector in managing these science/technology parks and business incubation centres.

3.4 Locally Delivered Projects In addition to nationally supported programmes there are several examples of business start-up and growth schemes that are locally/regionally delivered. Some examples are discussed below.

3.4.1 SPEEd West Midlands The SPEEd WM project offers students and graduates at any of eight universities in the region with training, advice and support to start a business. The £5 million project, which is partially funded by the European Regional Development Fund, provides students and graduates with:

 Experienced mentoring support.  Tailored entrepreneurship and business development training.

 Networking opportunities among their own group and with business people from the wider community.  Access to incubation services such as space in the form of hot-desking facilities.  A limited amount of financial support in the form of non-repayable grants.

The programme has been running for over four years, and has supported at least 1,200 students in developing business ideas. By 2010/11 SPEEd WM had created 140 new businesses in the area, resulting in over 480 new jobs. Whilst these are notable achievements a number of lessons have identified that have been used to inform further phases of the project (Clements and Moore, 2009):

 Entrepreneurial learning is a key element of overall learning and should be real time orientated.  From an individual‘s perspective business awareness and interpersonal skills training should be delivered as early as possible in the project.  Programmes need to be flexible to suit individual need; a generic approach is not appropriate.  The availability of seed corn funding within enterprise programmes is important, but should not be regarded as a right by participants. 31  More multi-disciplinary teams should be encouraged to create businesses – that should lead to stronger and more growth orientated businesses.  Collaboration between institutions is vital and of particular benefit where participants are drawn from institutions with different backgrounds.

One of the less visible advantages of SPEEd is that has encouraged universities to get involved in developing young entrepreneurs to the extent that they now play a far more active role in shaping entrepreneurial policies.

3.4.2 Integrated entrepreneurship support at Coventry University The Institute of Applied Entrepreneurship at Coventry University has created an integrated model for the development of entrepreneurs. The aim is to create lifestyles of entrepreneurship which can be achieved through focusing on (i) personal development as an entrepreneur (ii) providing entrepreneurial skills and (iii) providing business skills to exploit and implement new ideas. All three areas should be in equilibrium to create sustainable success, which is needed to stimulate socio-economic growth. This model also acknowledges the fact that no two businesses are the same and therefore support should be

tailored to the specific needs of a person and business. This support can and should change as the person progresses through different phases of obtaining knowledge, pre-incubation, incubation and commercialisation.

Various specialist units exist within the Coventry University group supporting this model such as the Serious Games Institute and the Health Design Technology Institute. Within this integrated support system all areas of business from idea development to the growth phase are addressed. This involves specific activities such as providing appropriate and flexible infrastructure, mentorship, funding as either grants or loans, knowledge through educational programmes, and providing support for creative problem solving through research, and networking opportunities.

3.4.3 Economic Challenge Investment Fund (ECIF) The ECIF project was implemented over the period April 2009 to September 2010 and was part of the HEFCE employer engagement programme. The primary purpose of the ECIF programme was to enable the higher education sector to support both individuals and businesses with innovative solutions to the world-wide economic problems of the late 2000s. These innovative solutions included activities such as ―graduate consultancy units", preferential rates for SMEs to access business support, direct consultancy for business, and 32 subsidised part-time training for cohorts.

Participants in the ECIF programme had to attend a Post-graduate Certificate course in Business Enterprise to acquire up to date information on areas of starting and managing a business. This involved completing assignments on their own companies making the course more applied and relevant, whilst mentoring was provided in order to assist in applying knowledge in a more innovative way. All participants had to complete a Wave entrepreneurial profiling exercise which assisted the mentor to work on individual participant strengths. This instrument also provided the participant with a sound basis to determine their goals and to act in a more focused manner.

3.4.4 Partnership programmes Various other programmes were implemented on a regional and local level such as the following:

 CUE Ltd is the leading partner in the UK Government's 'Soft Landing Zone' initiative focusing on facilitating a company's access to international markets.

 CUE Ltd project were also partners in the EU funded North European Network for Service Incubators (NENSI). This comprised of ten private and public service incubators with the common aim of sharing and developing best practice with regards to business incubation. NENSI ran from March 2006 to June 2008 developing business support for young and starting entrepreneurs whilst fostering regional, spatial and social development by creating viable small and medium-sized enterprises and helping them to increase their chances of sustainable success. The project boasts a business support model of best practice exchange, a virtual system for all its users and a benchmarking tool for would-be business incubators.  The Coventry and Nuneaton Enterprise Creation project operated between July 2006 and December 2008 and provided a comprehensive pre-incubation service to new start-up businesses in the West Midlands. Similarly, the Warwickshire Enterprise Creation project (September 2006 to May 2008) developed and delivered a comprehensive training course for start-up businesses alongside the provision of a pre-incubation service, to over 500 new entrepreneurs, leading to over 100 businesses started in Warwickshire.

3.4.5 Discussion All of the above programmes and projects have proven to be successful. Criteria of success 33 are varied but include the number of new start-ups, the number of jobs created and the growth of businesses. Deduced from discussions in paragraphs 3.4.1 to 3.4.4, the following best practices can be identified as contributing factors to the success of the above projects and programmes:

 The existence of integrated conceptual models for a specific institution help to clarify roles and the optimum allocation and usage of resources;  Funding in the form of non-repayable grants and loans are essential elements to progress faster form ideas to commercialisation of these ideas;  ―Hand-holding‖ is an important activity to support potential entrepreneurs through the first critical stages of business development; and  Allowing people to fail, support them to minimise the emotional impact of such an event, and support with the creation of another business idea is crucial.

3.5 Summary of financial arrangements In the following table is an overview of the projects and funding streams.

Report Project Duration Funding Source Value (£ or €) Section ERDF** 1996 to March 3.1.1 Accelerate €130,000,000 2010

3.1.2 Ansty Park: Manufacturing Technology Centre Technology Strategy Board (TSB) £40,500,000

2002 to ERDF** + Joint funded with Department of 3.1.3 Manufacturing Advisor Service WM December Business Innovation and Skills 2011

3.1.4 Niche Vehicle Network 2005 ongoing

Warwick (University) Manufacturing Group 3.1.5 1980 ongoing Public + Private (WMG)

June 2011 to 3.1.6 i-UEN ERDF** (£1 Million ERDF, £1 Million match) £2,000,000 2014

2002 3.2.1 Innovation Networks AWM* + ERDF** £3,900,000 (unknown)

3.2.2 Innovation Vouchers WM Part funded by ERDF** through AWM £337,523 34 3.2.3 Shorter Knowledge Transfer Partnerships Part funded by ERDF** through AWM £451,730

3.2.4 Business Link WM ERDF**

September 3.2.5 Innovation Advisory Service 2009 to March ERDF** £3,100,000 2013 March 2009 to 3.4.1 SPEEd WM ERDF** + HEIF £5,000,000 June 2012 Publicly funded Integrated entrepreneurship support at August 2008 – 3.4.2 Coventry University Present date February 2009 Matched funded from HEFCE and Institutions 3.4.3 Economic Challenge Investment Fund (ECIF) to September £50,000,000 (£25 Million each) 2010

3.4.4 Partnership Programmes - Soft Landing Zone

Partnership Programmes - North European March 2006 to Public + Privately funded Network for Service Incubators (NENSI) June 2008 July 2006 to Partnership Programmes - The Coventry and December AWM* Nuneaton Enterprise Creation 2008 September Partnership Programmes - Warwickshire 2006 to May AWM* Enterprise Creation project 2008

Notes *Advantage West Midlands (AWM) Advantage West Midlands is the Regional Development Agency for the West Midlands which invests £300 million each year into the region **European Regional Development Fund (ERDF) The European Regional Development Fund (ERDF) is a funding stream which is allocated to regions35 by the European Union to stimulate the regional economies, with the West Midlands receiving 400 million Euros to invest in projects which will support regional businesses and create jobs in the region (Communities 2011b). The programme aims to assist 22,441 businesses to improve performance, create 10,519 jobs and 2,495 new businesses and support the reduction in regional carbon emissions (Communities 2011b). Manufacturing Advisor Service WM (MAS WM) MAS WM will be closing at the end of December 2011, as the Government announced the closure of the Regional Development Agencies (RDAs) in the 2011 Budget, however the services will be transferred to a new national delivery partner. The Government will commit £57 million

of public funding to deliver MAS across of the whole of the UK. Responsibility for the MAS will be transferred to the Department for Business, Innovation and Skills (BIS).

36

3.6 Conclusion and Summary It is to be expected that different programmes will have different objectives and that evaluating them according to a generic set of principles will not do justice to the effectiveness of these programmes. Making a judgment on the value added of development programmes can only be made on the basis of longitudinal studies which are problematic for most development programmes due to their relative short term nature. Anecdotal data suggests that three years can be regarded as short term within development programmes and suggests that positive results can only be seen after six years and more. Within a world characterised by short term behaviours this poses problems. Nevertheless, without such programmes (whether short term or not) the level of success that could have been achieved is debatable.

It is well accepted that the world is currently experiencing growth in innovation on a scale far more rapid than has previously has been the case. This has been influenced by a combination of factors such as improved knowledge, availability of information, and an increase in countries improving on their commercialisation ability. It can be argued that this acceleration will in itself will lead to more innovation and that innovation is becoming a survival and growth imperative in such a challenging environment. Within this innovation- breeds-innovation environment, practices of the past are not necessarily a sound basis for the current environment and will probably be different again in five years time. In this regard, 37 innovation practice has moved from predominantly research-push (heavy investment in research and development) and demand-pull (focusing on demand in a linear manner) phases during the 1950's and 1960's, to more collaborative approaches (integrating internal and external approaches) during the 1980's, to a strategic-technology integration phase from the 1990's onwards. Therefore, it can be argued that innovation moved away from a purely functional approach to an integrated phase - the latter because of the fast and often unpredicted changes within the environment.

Within a challenging operating environment, entrepreneurs need guidance on identifying new trends, unpacking these trends into business ideas, testing the viability of ideas, and the subsequent implementation and growth of these opportunities. Programmes supporting entrepreneurs have been important in the past and will be important for the future as well. Based on the discussion in this section, the following general criteria for successful programmes can be identified:

 Integration Projects should strive for the maximum possible collaboration among critical stakeholders. Growth built on modern innovative approaches can only be successful through multi-disciplinary and multi-institutional collaborative approaches.

 Duration of programmes Projects should be longer term in nature. However, if they cannot be for longer term duration, specific objectives should be included to maintain support and service levels after the project is terminated. Sustainability is paramount.

 Knowledge Knowledge is key to all programmes. Entrepreneurs need to understand principles behind decisions and should be guided how to use this new knowledge in practice.

 Mentors and advisors Mentors and advisors are needed to support entrepreneurs implementing new knowledge and skills. These experts should probably be well equipped theoretically and experienced in practical applications.

38  Infrastructure Infrastructure such as science parks and business incubation centres should provide assistance to entrepreneurs during the initial phases.

 Networking Ample networking opportunities should be created between entrepreneurs and service providers.

 Financial assistance Financial assistance can provide an important stimulus for the development of initial ideas and the commercialisation of such ideas. Many ideas never get implemented due to a lack of financial support.

 Focused approach With increased competition and innovation, approaches of support programmes should be more focused. Improved specialisation and subsequent improved competitiveness can be achieved this way.

4.0 Regional mapping of the automotive cluster

4.1 Introduction: the global automotive sector The automotive sector has been one of the key drivers of global and economic change for nearly a century. From its early perception as a hand-crafted product accessible only to the motoring elite, the automotive sector would expand its goods into mass markets and mass production, particularly in the post-Second World War Era. From the 1920s onwards, as vehicles became more widespread in popularity, production was increasingly focussed into fewer but larger production operations, until by the mid 1960s half the world‘s production was concentrated in just three American firms; General Motors (GM), Ford and Chrysler. With the explosion of mass-motoring during this decade, as Western countries in particular invested in supporting motor infrastructure, markets for automobiles widened and new competition for the big three emerged. In particular, Asian manufacturers saw a huge growth in market share, including Toyota, Nissan and Honda from Japan and Hyundai from Korea. More recently, with the acceleration of globalisation, this Asian wave has been joined by rising production in Brazil, Russia, India and China (the BRIC economies). The result of this expansion of the global automotive market has been an almost continuous rise upwards in demand for and production of vehicles, most markedly in the post war era. This is best demonstrated in Figure 4.1 below. 39 Figure 4.1 Global production of passenger cars and commercial vehicles, 1900-2007 Source: Howleg (2009)

This growth in demand has also been matched by a change in emerging markets, with the traditional Western economies now being rivalled by growing demand from the East. Table 4.1 below demonstrates this trend by outlining new car registrations globally for 2010. This demand for motor vehicles in emerging markets is being met by traditional manufacturers, but also newly emerging manufacturers in these target economies. As a result, production has also shifted Eastward, with China and South Korea joining Western and Japanese companies to become major actors in passenger car and commercial vehicle production, as shown in Table 4.2.

Table 4.1 World volume of new cars registered 2010.

Country Volume EU27 11,567,336 - Germany 2,916,260 - France 2,251,669 - UK 2,030,846 - Italy 1,960,282 - Spain 982,015 - Poland 333,490 China 11,471,200 USA 5,638,400 Japan 4,798,400 India 2,795,088 40 Russia 1,757,100 Source: SMMT [AECA Passenger car registrations 2010]

Table 4.2 2010 Production Statistics

Country Cars Commercial Total % Global Share China 13,897,083 4,367,584 18,264,667 25.12 Japan 8,307,382 1,318,558 9,625,940 13.24 USA 2,731,105 5,030,335 7,761,443 10.68 Germany 5,552,409 353,576 5,905,985 8.12 South Korea 3,866,206 405,735 4,271,941 5.88 Brazil 2,828,273 820,085 3,648,358 5.02 India 2,814,584 722,199 3,536,783 4.86 Spain 1,913,513 474,387 2,387,900 3.28 Mexico 1,390,163 954,961 2,345,124 3.23 France 1,924,171 305,250 2,227,742 3.06 Canada 968,860 1,102,166 2,071,026 2.85 Thailand 554,387 1,090,126 1,644,513 2.26 Iran 1,367,014 232,440 1,599,454 2.20 Russia 1,208,362 194,882 1,403,244 1.93 UK 1,270,444 123,019 1,393,463 1.92

Country Cars Commercial Total % Global Share Turkey 603,394 491,163 1,094,557 1.51 Czech Rep. 1,069,518 6,867 1,076,385 1.48 Poland 785,000 84,376 869,376 1.20 Italy 573,169 265,231 857,359 1.18 Argentina 508,401 208,139 716,540 0.99 Source: OICA

Data provided by the International Organization of Motor Vehicle Manufacturers (OICA) shows that total world auto production increased by some 16% over the period 1997–2009 to 61.7 million vehicles. Vehicle production in the USA, Japan and Europe represented 77% of global production in 1997 but this had declined to around 50% by 2010 whilst production in China had risen from 3% of the total in 1997 to over 25% in 2010.

Since the turn of the millennium the industry has undergone consolidation as a wave of cross-border mergers and acquisitions left the global market dominated by a few large corporations (Ford, Toyota, GM, Renault-Nissan and Volkswagen) seeking to maximise market share and benefit from economies of scale and scope. However, not all of these attempts to consolidate were successful, as demonstrated by the ill-fated DaimlerChrysler Mitsubishi merger and the failure and break-up of the Ford Premier Automotive Group. 41 The impact of this rapidly increasing production and consolidation was a saturation of existing markets and over-production as companies attempted to anticipate demand in newly emerging economies in Eastern Europe and the opening up of the Chinese market in particular. Total global output of the automobile industry rose by three million vehicles (to approximately 60 million) in the first five years of the twenty-first Century. Even before the substantial downturn associated with the financial crisis in 2008/09 the industry was suffering from over-capacity and increased competition to the extent that the larger firms had come to rely on their captive financial arms (or Autobanks) to generate profits. This process had the effect of accentuating further the subsequent impact of the collapse of global credit markets on the automotive sector (Begley, 2009).

The dual blow of shrinking sales and falling profitability of the Autobanks in the post-crisis environment had a devastating impact on manufacturers, bankrupting firms like GM and Chrysler that were already struggling with structural issues prior to the credit crunch. The downturn in fortunes of some of the world‘s biggest corporations had a domino effect down the supply chain as the automotive sector underwent serious contraction; component suppliers, providing modules and parts for vehicle manufacture, were dependent on the

success of major manufacturers to maintain the profitability of their own firms, which like their assembly counterparts had also been pursuing the route to increased consolidation through merger (Dicken, 2011).

The industry today faces a series of challenges that are environmental, economic and consumer driven. The carbon challenge and the threat of resource depletion have forced the normally slow-moving industry to pursue alternative technological solutions to the internal combustion engine (ICE). Solutions are dependent on stringent national and international regulation related to production and consumption of vehicles, with low carbon values being the new mantra of the industry.

Consumers have also become more demanding and knowledgeable about their vehicles; flexible technologies have made possible the production of a wider portfolio of vehicles in response to rising middle class incomes and differentiated lifestyles which has resulted in increasing fragmentation of the market. Firms now have to rise to these challenges while simultaneously resolving issues of emerging low carbon production values and existing over- capacity. These are testing times for the automotive sector; however, the importance of the industry is not in doubt. Indeed, if automotive manufacturing were a country, it would be the sixth largest economy globally with output equivalent to almost €2 trillion (OICA, 2011) (Table 4.3). 42

Table 4.3 Turnover in the automotive industry 2007 (in € million) Country Turnover Japan 435,610 USA 425,106 Germany 227,666 France 111,901 China 86,984 Canada 77,469 Spain 75,104 Korea 62,993 UK 58,238 Italy 54,135 Turkey 28,196 Brazil 26,997 Sweden 24,784 South Africa 20,602 Australia 18,929 Belgium 18,225 India 16,893 Poland 16,202 Austria 13,900

Czech Rep. 12,091 Thailand 11,655 Slovakia 8,711 Hungary 8,144 Netherlands 7,876 Russia 7,019 Malaysia 6,084 Portugal 4,457 Switzerland 4,252 Indonesia 3,858 Argentina 3,519 Mexico 3,348 Egypt 2,901 Romania 1,836 Slovenia 1,544 Denmark 1,165 Finland 1,076 Croatia 205 Greece 162 Total 1,889,840 Source: OICA

Other trends in the industry add to the challenges for suppliers as well as Original Equipment Manufacturers (OEMs). The automotive sector is seen by many as a producer-driven value chain where the major OEMs play a central role in coordinating the production network 43 (Dicken, 2011). Under the ‗lean manufacturing‘ model manufacturers prefer to deal with fewer suppliers so as to reduce costs. This results in waves of consolidation rippling downwards along the supply chain. This has manifested itself in increased levels of R&D, and a move toward modularization (complete, generic modules), by first-tier suppliers that survive and which, in turn, wield greater power over lower tier suppliers. This has led to major suppliers setting up in close geographic proximity to the OEMs‘ plants. Yet more international component sourcing by these suppliers enables low-cost component imports to penetrate mature producing regions, as first-tier suppliers may have little incentive to source components locally. This in turn adds to the pressure on suppliers in mature markets.

A major impact of these changes has been the search for ever lower labour costs resulting in an increase in decentralising global production into low labour cost countries. However, as Howleg (2009: 25-26) notes, labour costs might be overstated;

“There still are significant labour cost differences across countries, however, direct labour only accounts for about 4% of total value in a vehicle. Also, the higher the vehicle segment, the less important labour cost become ... The

majority of value in the motor industry is generated in the component supply chain, while manufacturing plays only a minor part.”

4.2 The UK Auto industry Over the past decade, the UK automotive industry has been in relative decline, leading to a situation where it is no longer considered a natural environment for volume car production. This decline has been manifest in a number of high-profile plant closures over the past decade, most notably those of MG Rover in Birmingham, Peugeot in Coventry, GM in Luton and Ford in Dagenham. Currently, volume production is limited to a handful of overseas owned assembly facilities, most notably those operated by Japanese firms Toyota, Honda and Nissan. Arguably the UK has suffered disproportionately when compared to other European countries. One reason offered for this is that it was significantly easier to close plants and make workers redundant in the UK than in other parts of the EU. A consequence of this was a shift in the emphasis of production away from volume manufacture towards luxury and niche markets (NAIGT, 2009).

Despite such relative decline, the UK car industry still remains an integral component of the UK economy, as demonstrated in Table 4.4 below.

44 Table 4.4 Car production annual totals

Home Export Year Production % Change % Change % of Total % Change % of Total Market Market

2000 1,641,452 -8.8 578,462 -10.9 35.2 1,062,990 -7.5 64.8

2001 1,492,365 -9.1 598,151 3.4 40.1 894,214 -15.9 59.9

2002 1,629,934 9.2 582,484 -2.7 35.7 1,047,450 17.2 64.3

2003 1,657,558 1.7 513,798 -11.8 31 1,143,760 9.2 69

2004 1,647,246 -0.6 467,160 -9.1 28.4 1,180,086 3.1 71.6

2005 1,596,356 -3.1 411,245 -11.9 25.8 1,185,111 0.4 74.2

2006 1,442,085 -9.7 335,992 -18.3 23.3 1,106,093 -6.7 76.7

2007 1,534,567 6.4 349,108 3.9 22.7 1,185,459 7.2 77.3

2008 1,446,619 -5.7 318,033 -8.9 22 1,128,586 -4.8 78

2009 999,460 -30.9 237,226 -25.7 23.7 762,234 -32.5 76.3

2010 1,270,444 27.1 309,024 30.3 24.3 961,420 26.1 75.7 Source: SMMT

In terms of profile the UK automotive industry in 2011:  Produces over one million cars and commercial vehicles and over two million engines annually.  Is home to seven OEMs (including Nissan, MINI, Land Rover, Honda, Toyota and Vauxhall) and eight Commercial Vehicle manufacturers (including Vauxhall, Ford, Leyland Trucks, Land Rover and Alexander Dennis).  Contributes over 10% of total UK exports, delivering an average annual export value of more than £25bn over the last five years.  Exports to over 100 markets worldwide.  Exported 75% of the vehicles it manufactured  Had the fourth highest R&D spend in Europe and represented a fifth of core global R&D activity in 2010.  Employs over 700,000 people from manufacturing to retailing and contributes £8.5bn added value to the economy.  Is home to the largest number of specialist sports car manufacturers in the world and 19 of the world‘s top 20 suppliers.  Hosts eight of the twelve current Formula One teams, supported by more than 300 specialist motorsport companies, employing nearly 50,000 people in ‗motorsport valley‘, a business cluster located in the centre of the UK, with Oxford at its centre. 45

Table 4.5 shows key industry indicators from 2005-9. The most notable trend is the downturn in revenue, production and employment associated with the recent recession, especially after 2008.

Table 4.5 UK automotive industry sector profile

2005 2006 2007 2008 2009

Automotive manufacturing turnover (£bn) 48.2 49.3 51 52.5 39.8 % Share of transport manufacturing turnover 67.7 66.7 67 70 59 Total net capital investment (£bn) 1.3 1.4 0.9 1.4 0.8 Automotive sector value added (£bn) 9.4 9.9 10.3 11.2 8.5 Total employees (directly dependent) 869,000 851,000 840,000 807,000 729,000 Value of exports (£bn) 23.7 24.1 26.1 28 23.8 Percentage of total UK exports (%) 11.2 9.9 11.8 11.8 10.5 Value added share of GDP - ALL (%) 3.3 3.2 3.3 2.6 2.4 UK share of global car production (%) 2.7 2.4 2.4 2.9 1.8 No. of UK volume car manufacturers 8 7 7 7 7 No. of UK CV manufacturers 9 9 9 9 8 Source: SMMT

As shown in Table 4.6 below automotive manufacturing in the UK is particularly concentrated in the West Midlands (see section 4.3), the South East and the North West regions. The table further demonstrates the UK‘s strengths in both premium and sports car brands and commercial vehicles.

Table 4.6 Automotive manufacturing sites in the UK

Manufacturer Location Product West Midlands Aston Martin Gaydon Vantage and DB9 sports cars

Dennis Eagle Warwick N&W truck range

Jaguar Castle Bromwich, Birmingham XJ, XF and XJ cars

JCB Staffordshire Construction industry vehicles

Land Rover Solihull Defender, Discovery, Evoque and Range Rover 4x4 vehicles London Taxis Int. Coventry TX taxi range

MG Motor Longbridge MG TF sports car

BMW Birmingham Engine

Morgan Malvern 4/4, Aero, Plus4 and Roadster 46 sports cars Spyker Coventry C8 Aileron sports car

Tata Coventry Production of Invicta electric car forthcoming Westfield Dudley SE, XTR and X1 sports cars

South East Alexander Dennis Guildford Enviro bus range

Caterham Dartford Super 7 sports car

Ford Dagenham and Southampton Transit van and minibuses, engines John Dennis Coachbuilders Guildford Bus and coach

McLaren Automotive Woking MP4-12C sports car

MINI Oxford MINI small car

Rolls-Royce Goodwood Ghost and Phantom cars

Vauxhall Luton Trafic and Vivaro van and minibus ranges North West Bentley Crewe Continental and Mulsanne cars

Leyland Trucks Leyland DAF, CF, LF and XF trucks

Land Rover Halewood Freelander 4x4 vehicle

Vauxhall Ellesmere Port Astra car and van ranges

Toyota Deeside Engines

North East Nissan Sunderland Juke and Qashqai 4x4 vehicles, and Note, Tone and Leaf cars Smith Tyne and Wear Commercial electric vehicles

South West Honda Swindon Civic, CR-V and Jazz cars

East of England Lotus Norwich Elise, Europa, Evora and Exige sports cars East Midlands Toyota Burnaston Auris and Avensis cars

Yorkshire and Humberside Optare Leeds Solo, Temp and Versa bus range Plaxton Scarborough 16 to 70 seat buses and coaches Wales Ford Bridgend Diesel engines 47

Source: SMMT

Despite the apparent health of the industry it is beset by a number of problems. While it remains Britain‘s largest exporter of manufactured goods, is an even greater importer with a deficit of £16.75 billion recorded in 2007, the largest in any UK trade sector. As the assembly industry is contracting, so too is component manufacturing as production shifts to Eastern Europe and elsewhere. Both manufacturers and suppliers, therefore, are suffering from hollowing out and an inevitable weakening of the supply-chain. Parallel to the overall contraction of the industry has been a relative fall in R&D expenditure, a key component in promoting industrial growth and expansion. When compared with R&D expenditure in comparable countries in the EU, the UK has fared badly, exhibiting the lowest growth amongst its peer group.

Between 1995 and 2004, the overall growth of such spending grew by nine per cent in the UK, while in France it rose by 50 per cent and in Spain and Germany it tripled. Within these figures, Jaguar and Land Rover‘s annual R&D spend of roughly £1bn accounts for over 80 per cent of the UK total (Howleg, 2009). The root cause of this decline in R&D investment in

the UK is because automotive firms tend to spend the bulk of R&D expenditure in their home markets, highlighting Britain‘s lack of a viable domestically owned volume car industry. The conclusion drawn is that in comparison with others countries, the UK is in a relatively weak position when it comes to developing new technologies and systems within its national boundaries.

In addition overseas ownership makes the UK automotive sector vulnerable to global decisions on cost cutting and re-location of production. UK engineering and design does remain strong - with a major concentration of high value automotive design and engineering businesses in the West Midlands as noted in the following section. However recognised skill deficiencies still plague the sector, with the profession perceived as unattractive and unrewarding amongst both school leavers and graduates. As a result the industry in the UK remains in a precarious position, an issue which is explored in relation to the West Midlands in the following sub-section of this report.

4.3 The West Midlands automotive cluster

4.3.1 History and context The West Midlands region has a rich automotive heritage with the first cars in the UK 48 manufactured in Coventry and Birmingham during the late 1890s. The industry subsequently grew to be one of the largest in Europe. The Lanchester Motor Company was established in Coventry in 1895 and was followed in 1901 by the Wolseley Tool and Motor Company and the Rover Company. The Longbridge plant in Birmingham was set up by Herbert Austin in 1905 growing into a major global production site. Other famous names included Triumph, Hillman, Standard and Jaguar. As in other clusters component supply firms quickly established adjacent to production sites with local metal based trades dating from the industrial revolution able to adapt to manufacturing automotive parts.

Demand for relatively inexpensive motors, allied to improved infrastructure and economic conditions in the post WWII period saw a move toward mass-motoring in the UK, presenting West Midlands firms with enormous market opportunities. However, as the industry became increasingly globalised, the following decades saw the UK automotive sector and West Midlands based companies suffer a reversal of fortunes. Established marques such as Rootes, Standard, Alvis and Rover struggled to compete in the global marketplace beset by a combination of problems including lack of investment, poor labour relations, poor quality and weak cost control. These problems escalated to such an extent that the industry in the

UK was effectively nationalised and, through a series of government brokered mergers, saw the creation of British Leyland (BL) in 1968. BL represented an attempt to create a recognisable British brand that could compete in international markets in terms of scale and scope of economy.

However, this did not reverse entrenched decline and BL continued to suffer from poor labour relations, weak management and poor political decision making, resulting in the breakup of the company and re-establishment of smaller independent producers including Austin-Rover, Jaguar Daimler and Leyland Daf. These firms existed in the region alongside other foreign owned producers including Chrysler (subsequently Peugeot-Talbot) which had taken control of another ailing UK manufacturer, Rootes group. The story did not end there, and the final closure of MG-Rover in 2005 ended 100 years of volume production at Longbridge, swiftly followed by the closure of Peugeot in 2006 effectively ending volume production in Coventry. This left the region dependent on Jaguar Land-Rover, a handful of niche producers and the accompanying components sector (Gomes et al., 2010). Decline has continued with employment decreasing by approximately one third since the turn of the Millennium.

4.3.2 Current profile of the West Midlands automotive sector 49 Despite high profile closures, the region today remains the engine room of the UK automotive industry, with around 15% of car production, 28% of market value and 28% of the UK jobs in the sector. This concentration of activity (highlighted in Table 4.8) is placed into context when the number of automotive firms and employees in the region are benchmarked against Great Britain. This produces location quotients of 1.97 and 2.86 respectively (see Table 4.7).

The West Midlands automotive cluster can thus be described as ‗mature‘ and, in common with other ‗old industrial clusters‘, undergoing change (Rosenfeld, 2002). Many companies in the West midlands automotive sector depend on traditional low value-added manufacturing and the sourcing decisions of foreign-owned volume manufacturers. The region also underperforms in terms of productivity and competitiveness when compared to possible competitor regions elsewhere in Europe, such as Stuttgart, France-Comte and Piemonte (DTI, 2006). However, MacNeil and Liu (2003) highlight that whilst much of the industry is concerned with low-value-added production, there are a number of exemplar firms within the regional cluster that are driving the sectors‘ competitiveness through design-led production in niche sectors and technologies. These include:

 Vehicle makers in the premium and upper premium sector The region hosts two major premium automotive brands in Jaguar (Castle Bromwich) and Land Rover (Solihull). In addition, Aston Martin established its production factory at Gaydon in 2003, the company having moved to the West Midlands from their former HQ north of London. Jaguar Land Rover has also recently announced plans to create a £355m engine plant to manufacture low-emission car engines in Wolverhampton, which will create 750 new jobs1. The region also hosts the BMW engine plant at Hams Hall just outside Birmingham. This factory produces petrol engines for assembly factories in Britain (New Mini), Germany, South Africa and the United States, with an output of 385,000 engines in 2010 (SMMT, 2011).

 First and second tier suppliers adjacent to remaining car makers Also located in the region are first tier suppliers, mostly multinationals in non-UK ownership, including: o GKN in Redditch (drive shafts, universal joints, chassis manufacture and other products) o Wagon in Walsall (body manufacturing and engineering, doors and door systems/mechanisms, glazing) o Denso in Sutton Coalfield (starters and alternators) 50 o Delphi in Coventry (engine management and injection systems) o Valeo in Birmingham (suspension systems) o Lear Corporation in Coventry (seats and interiors) o Unipart Group in Coventry (exhaust systems and fuel tanks) o Rockwell in Sutton Coalfield (body/chassis systems and brakes) o Dana in Birmingham (axles) o Siemens-VDO Instruments in Birmingham (electronics) o Pirelli in Burton-on-Trent (tyres)

Significant second tier suppliers are also present within the region and include, for example: o Sarginsons in Coventry (precision components) o Zeus in Dudley (aluminium castings) o Brandaur in Birmingham (pressings) o Radshape in Birmingham (sheet metal forming)

1 http://www.guardian.co.uk/business/2011/sep/19/jaguar-land-rover-plant-midlands

o Premier Stampings in Dudley (die forgings) o Triplex in Sandwell (glass)

Alongside the West Midlands‘ core automotive sector, the south east of the region also forms part of the largest concentration of motorsport firms in the UK, commonly known as ‗Motorsport Valley‘. This business cluster is recognised as an unparalleled community of knowledge, and has attracted many of the top international motorsport teams to harness research and development and rapid prototyping capabilities.

In total, first and second tier suppliers in the region number approximately 400 firms, with almost half of these micro enterprises employing fewer than 10 people. The total workforce across these 400 firms is roughly 22,000, although half of these are employed in just 30 large companies.

 Sports cars and niche vehicle manufacturers The region is home to a significant number of specialist vehicle producers. Sports car manufacturers include Aston Martin, MG Motor, Morgan, Spyker and Westfield. Alongside these companies specialist vehicle producers located in the region include London Taxis International (manufacturing the world famous ‗black cab‘), Dennis- Eagle (public service vehicles), and JCB (construction industry vehicles) which has 51 its world headquarters in Staffordshire. The development of the niche vehicle sector has been a priority for regional policy makers over the past decade including through establishment of a Niche Vehicle Network in 2005, bringing together small manufacturers to collectively explore business needs such as research and development and marketing of alternatively fuelled low carbon vehicles. These small producers are shortly to be joined by Tata motors who will be producing their Invicta EV at a new production facility in Coventry.

 Design, research and development and engineering consultancies Supporting services to the automotive sector within the region include businesses offering engineering design and technical development, for example: o Pro-Drive near Kenilworth (Motorsport business with HQ and test track in the region) o Zytek in Lichfield (R&D in automotive control systems) o Ricardo in Leamington Spa (engineering consultancy) o Motor Industry Research Association (MIRA) near Nuneaton (research and testing facilities)

o Manufacturing Technology Centre in Coventry (bringing together academics, engineers and industry professionals to demonstrate new technologies on an industrial scale).

This concentration of companies and skills is regarded as world class. The large number of materials processing and general engineering firms in the region provide a significant base of expertise but, for the most part, reflects traditional skills. Even the design and engineering services sector is largely concerned with the mechanical parts of the vehicle. However, an increasing proportion of added value is in the electrical and electronic parts of the car and the West Midlands sector has little representation (though QinetiQ in Worcestershire is one of the few exceptions) in this area of the automotive industry, which is a cause for concern for the regional cluster. Notwithstanding this, the region benefits from a well developed university infrastructure with world leading automotive research centres such as: the Warwick Manufacturing Group (WMG) and the International Automotive Research Centre (both at the University of Warwick); Coventry University‘s Automotive Engineering Applied Research Group with extensive programmes in engines emissions research with Ford, Jaguar, Land Rover, and Johnson Matthey; and the Institute for Energy Research and Policy at the University of Birmingham. In addition, Coventry University has a world-wide reputation for training of automotive designers. Consistent with the 52 Triple Helix model, a major new development has been the launch of the Manufacturing Technology Centre at Ansty Park in Coventry. This is a collaborative partnership between industry, Universities, and research and development organisations in order to support manufacturing companies and their supply-chain improve competitiveness. Rolls Royce Aerospace and Jaguar Land Rover are key partners. Finally, much of the research work in the industry is bolstered by specialist support bodies such as the Technology Strategy Board (TSB) and Cenex, the UK's first Centre of Excellence for low carbon and fuel cell technologies.

4.3.3 Contribution to the regional economy The manufacturing sector as a whole plays a key role in the West Midlands economy and accounted for nearly £14 billion (or 15 per cent) of the total regional Gross Value Added (GVA) in 2009, higher than the proportion for the UK as a whole (at 12 per cent) (Medland, 2011). Table 4.7 presents a breakdown of the proportion of manufacturing GVA in the region by sub-sector across the period from 2000 to 2008. Though the contribution to manufacturing GVA made by the manufacture of transport equipment (including cars,

commercial vehicles and motorbikes) has steadily declined over the past decade (a factor exacerbated by economic downturn after 2007) in 2008 it still accounted for some 15% of the total; second only in importance to the fabrication of metal products at 21%. However, it should also be noted that a number of other sub-sectors are themselves part of the automotive supply-chain and contribute products which ultimately appear as a part of vehicles manufactured in the region.

Table 4.7 Proportion of regional manufacturing GVA by industry – West Midlands

West Midlands 2000 2001 2002 2003 2004 2005 2006 2007 2008

Manufacture of Food DA Products; Beverage 10.0% 10.4% 10.8% 11.3% 11.8% 11.7% 11.6% 11.1% 11.2% and Tobacco Manufacture of Textiles DB 2.4% 2.2% 2.1% 1.9% 1.8% 1.7% 1.7% 1.8% 1.7% and Textile Products

Manufacture of Leather DC 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.4% 0.5% 0.6% and Leather Products

Manufacture of Wood DD 1.3% 1.3% 1.4% 1.5% 1.6% 1.6% 1.5% 1.6% 1.6% and Wood Products Manufacture of Pulp, Paper and Paper DE 5.8% 5.9% 6.1% 6.0% 5.9% 5.6% 5.3% 5.0% 5.0% Products Publishing and Printing Manufacture of Coke, DF Refined Petroleum and 0.4% 0.4% 0.5% 0.4% 0.4% 0.3% 0.3% 0.5% 0.5% Nuclear Fuels 53 Manufacture of Chemicals, Chemical DG 3.0% 3.1% 3.2% 3.3% 3.3% 3.7% 4.1% 4.2% 4.3% Products and Man- made Fibre Manufacture of Rubber DH 6.9% 6.8% 6.8% 6.7% 6.5% 6.2% 5.8% 5.8% 5.8% and Plastic Products

Manufacture of other DI 5.7% 5.7% 5.9% 6.0% 5.7% 5.5% 5.2% 5.2% 5.1% Non-metallic products Manufacture of Basic DJ Metals and Fabricated 19.8% 19.6% 19.3% 19.6% 19.9% 20.9% 21.1% 21.4% 20.2% Metal Products Manufacture of Machinery and DK 11.1% 11.2% 11.3% 11.7% 11.9% 11.8% 12.6% 13.0% 14.1% equipments not elsewhere classified Manufacture of DL Electrical and Optical 11.1% 9.8% 8.9% 8.6% 8.7% 9.2% 9.5% 9.7% 9.8% Equipment Manufacture of DM 18.1% 18.9% 19.1% 18.3% 17.8% 17.2% 16.1% 15.2% 14.8% Transport Equipment

Manufacture not DN 4.2% 4.4% 4.4% 4.4% 4.4% 4.4% 4.7% 5.1% 5.2% elsewhere classified

Total Manufacturing GVA (£) 16,272 15,967 15,459 14,980 14,743 14,650 14,641 14,682 13,974

Source: ONS

4.3.4 The Labour force in the West Midlands Auto cluster In terms of employment, Figure 4.2 shows a breakdown of the automotive employment by sub-sector, using the 2003 Standard Industrial Classification (UK equivalent of NACE). This illustrates the progressive decline in automotive employment across a 12 year period from 1998 to 2010, an overall decrease of some 54% for the industry as a whole. Within this general picture employment in the manufacture of vehicles declined by as much as 63%, with decline in employment in manufacture of vehicle bodies and components marginally less dramatic at 47% and 45% respectively. These figures partly reflect the high profile plant closures referred to previously and subsequent knock-on effect through the supply chain. Despite this contraction the industry still accounts for over 36,000 jobs in the region and about 25% of total UK jobs in this sector.

Figure 4.2 Employment in the West Midlands Automotive Sector (2003 SIC, 2 digit division 34 – equivalent to NACE C29)

90,000

80,000

70,000 54

60,000

50,000

40,000 Employment

30,000

20,000

10,000

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Manufacture of motor vehicles Manufacture of bodies, trailers and semi-trailers Manufacture of components Total automotive employment Source: ONS

When employment in the automotive sector as a whole is disaggregated by firm size, the industry is shown to be dominated numerically by SMEs, which account for 92% of the total. Yet these same firms provide just 34% of sectoral employment, with the remaining 66% of

jobs provided by just 42 large firms (see table 4.8). Automotive firms with workforces greater than 50 are far more prevalent in the West Midlands than the country as a whole, with a location quotient of over 3. Indeed, 30% of such firms are located in the West Midlands (Berkeley et al., 2011).

Table 4.8 Automotive firms and employees in the West Midlands by company size band (2008)

Share of GB Great Britain West Midlands LQ Total Automotive Firms

1-10 employees 2,195 283 12.89 1.54 11-49 565 122 21.59 2.46 employees 50-199 289 81 28.03 3.02 employees 200 or more 142 42 29.58 3.26 employees Total 3,191 528 16.55 1.95

Automotive Employment 55 1-10 employees 6,719 964 14.35 1.68 11-49 13,781 3,069 22.27 2.52 employees 50-199 30,099 8,849 29.40 3.19 employees 200 or more 101,389 25,600 25.25 2.91 employees Total 151,988 38,482 25.32 2.87 Source: ONS

The gender profile of the workforce is presented in Table 4.9, which shows that despite a greater than 50% reduction in overall employment numbers between 1998 and 2008, the proportions of male and female employees have remained relatively static at approximately 88% male and 12% female. Over the same period, the workforce has remained overwhelmingly full-time in employment status.

Table 4.9 Employment in the manufacturing of motor vehicles, trailers, etc – West Midlands

Full Time Part Time Year Male Female Total Workers Workers 1998 68,960 10,281 79,241 78,016 1,225 1999 60,354 9,031 69,385 67,945 1,439 2000 59,916 9,655 69,572 68,328 1,244 2001 56,149 9,049 65,198 64,087 1,111 2002 56,134 9,000 65,134 64,040 1,094 2003 53,074 7,326 60,400 59,219 1,181 2004 48,920 7,110 56,031 54,923 1,108 2005 46,531 6,701 53,231 51,820 1,411 2006 36,473 5,983 42,456 41,502 954 2007 34,429 5,046 39,476 38,648 828 2008 33,881 4,600 38,482 37,798 684 Source: ONS

In addition to being a male dominated industry, the age profile of the automotive sector in the West Midlands shows that the workforce contains a significant proportion of older workers 56 (aged 50 and above). This group makes up some 28% of the total number of employees (see Table 4.10). The occupational profile of employment in the sector is predominantly skilled with over half of all automotive workers in the region performing either ‗skilled trades‘ (27%) or ‗process, plant and machine operations‘ (26%). Alongside these workers, a further 33% of employees are accounted for by managers and professionals (see Table 4.11).

Table 4.10 Age profile of the West Midlands automotive sector workforce (2008)

Age Band % Automotive sector workforce Aged 16 - 19 2% Aged 20 - 24 4% Aged 25 - 44 66% Aged 55 - 59 20% Aged 60+ 8% Source: SEMTA

Table 4.11 Occupational profile of the West Midlands automotive sector workforce (2008)

Occupational group % Managers & senior manager 14% Professionals 11% Associate professionals (Technicians) 8% Administrative & secretarial 6% Skilled trades (craft) 27% Personal service <1% Sales & customer service 2% Process, plant & machine operatives 26% Elementary occupations 6% Source: SEMTA

4.3.5 Workforce skills As with much of the manufacturing sector, the automotive industry is typically regarded as an unattractive and insecure choice by young people in the UK. As a result, the sector in the West Midlands is experiencing significant skills shortages, with SEMTA (2001), the UK sector skills council that represents employers in engineering manufacture and the science industries, identifying the major technical and engineering skills gaps in: 57

 Materials Requirement Planning (MRP)  CNC Machine Operation  Computer Aided Manufacture (CAM)  Computer Aided Engineering (CAE)  Tool setting  Welding skills  Fabrication

These skills deficits are a long-term issue, with a report published by Birmingham and Solihull Learning and Skills Council almost ten years ago highlighting similar shortages of skilled and semi-skilled workers in the West Midlands automotive sector (MacNeil and Liu, 2004). In addition to the perceived unattractiveness of the sector amongst young people, this earlier report also highlighted: the continually changing nature of the industry and the subsequent need to introduce new systems and processes; and a reluctance to invest in training due to high turnover of staff, as important factors in the perpetuation of skills shortages. Both of these are significant issues to be addressed if the long-term future of the

industry is to be secured, especially given potential opportunities in new and emerging low carbon transport technologies highlighted in the following section of this report.

4.3.6 The future of the West Midlands automotive sector: the Low Carbon Challenge The West Midlands gains economically from having some of the most successful vehicle manufacturers, an efficient supply chain and reputation for world class production techniques. However, as with the industry globally, the sector is challenged by emerging trends toward carbon efficiency, and prominent public policy discourse which envisages the substitution of Internal Combustion Engines (ICE) with alternative low carbon personal transport solutions. In addition, competition from Eastern Europe founded on lower labour costs, and the emergence of new producers in Asia (and in particular the inexorable growth of the Chinese automotive industry), means that the future of the West Midlands as a key centre for automotive engineering and production is under renewed threat.

The lack of a recognisable domestic brand to represent the UK automotive sector presents a major obstacle to the region, with decisions on the future of the industry removed from the immediate sphere of regional and national influence. In the short term the regional supply chain must remain viable under global competitive pressure in order to survive. Pricing premiums are continually being challenged and eroded with increasing emphasis on reduced 58 cost, zero defects and on time delivery. In the long term the supply chain from Original Equipment Manufacturers (OEM) to the lowest tier must develop and supply new and innovative product that can fulfil both customer and legislative demands.

In particular, low carbon motoring and low emissions vehicles, allied to the need for Intelligent Transportation Systems (ITS) offer the West Midlands automotive sector a potential opportunity for growth and development for the future. It must be recognised, however, that the Low Carbon Vehicle Sector (LCV) is a slowly emerging industry. In 2008, legislation committing vehicle manufacturers to specific CO2 emissions targets for new car registrations was passed. Subject to their individual targets, vehicle manufacturers will have to comply with new car average CO2 emission targets of 130g/km CO2 by 2015 and 95g/km CO2 by 2020. The legislation sets out an exacting programme for car manufacturers with 65% of new cars averaging the 130g/ km target by 2012, 75% by 2013, 85% by 2014 and 100% by 2015 (SMMT, 2011).

These stringent regulations have encouraged producers to pursue a range of alternative fuel options for powering their manufactured vehicles. In the UK Electric Vehicles (EVs) are

regarded as the most obvious short to medium term solution to the emissions and carbon challenge (with hydrogen-powered vehicles offering longer-term promise). The term EV includes Pure-Electric Vehicles, Plug-In Hybrid Vehicles and Extended-Range Electric Vehicles. Pure EVs are wholly electric vehicles operated by a battery and are currently limited to a range of approximately 100 miles. Plug-In Hybrids have a battery range of about 10 miles, after which they use battery and ICE technology for propulsion. Extended-Range Electric Vehicles have a short battery range (approximately 40 miles) which is extended by an ICE on-board generator. Unlike Plug-In Hybrids, these vehicles always use electricity for propulsion. On 1 January 2011, the UK Government announced that motorists would be entitled to 25% (up to £5,000) off the list price of an electric, plug-in hybrid or hydrogen fuel cell car, providing it emits less than 75g/km of CO2 and meets safety, reliability, performance and warranty standards set by the Office for Low Emissions Vehicles (OLEV). However, to date this scheme has proven less than successful with just 786 people taking advantage of the grant between up to 30th September 2011 (DFT, 2011). Worryingly, the rate of uptake of the grant has declined significantly over the period, with quarter three sales in 2011 less than 25 per cent of those realised in quarter one. Moreover, funding for the grant scheme has been dramatically scaled back from £230m to just £43m, and is under review in 2012.

A key issue hampering uptake of LCVs lies with consumer unwillingness to invest in an unproven technology with inferior performance and a higher purchase cost than existing ICE 59 technology. For example, whilst the 700cc petrol version of Mitsubishi‘s ‗i‘ retails in the UK for around £9,000, the fully electric version (i-MiEV) went on-sale to the public in January 2011 for £23,990 inclusive of the government‘s £5,000 grant. Most LCVs offer varying trade- offs in terms of size, performance and cost, none of which endear them to sceptical consumers. In addition, the range of LCVs currently available is a further impediment on sales, with some commentators arguing that the stringent eligibility criteria applied to the plug-in grant in the UK is restricting market choice (Guardian, 2011a). The effect of such issues is that whilst production capacity of LCVs is likely to reach some 4 million worldwide by 2015, demand may lag significantly behind (Motavalli, 2010). This provides evidence of the need for a demand push, and is further illustrated in data which suggest that consumers are dissuaded from purchasing alternatively fuelled vehicles by perceptions of poor performance and limited supporting infrastructure. Indeed, in research conducted by GfK Automotive (2011), 68 per cent of respondents suffer range anxiety relating to the distances that electric vehicles can travel between charges; the same proportion expressed fears about limited charging infrastructure, and 54 per cent expressed reservations about the time taken to recharge vehicle batteries. Nevertheless, with the depletion of existing oil reserves and the dual issues of health and environmental disbenefits associated with ICE technology,

the slow-moving automotive industry is being forced to adopt and promote Low Carbon technology in its existing production methods at a rapid rate.

Against this backdrop of uncertainty over consumer acceptance the West Midlands region is well placed to take advantage if and when the market for LCVs takes off to the degree forecast. There is significant existing expertise in the exploitation of low carbon technologies for automotive use (via organisations such as Cenex, ARUP, Jaguar Land Rover, Tata Motors and Microcab) and through world class lightweight material technologies (exploited by companies such as Jaguar Land Rover and its supply chain). Opportunities for regional automotive producers have already been recognised by local manufacturers and policy makers and there are a range of projects in progress with local stakeholders and development authorities to fully explore the possibilities offered by the emerging sector. On the basis of information from the (then) Regional Development Agency, Advantage West Midlands (2011), this activity included:

 A £38m Low Carbon Vehicles Technology (LCVT) programme involving collaborative research and development across 16 key technology platforms providing solutions in areas such as motors, batteries and aerodynamics. Funding is drawn from the Low Carbon Economic Area programme (above) and industry partners 60  A £14.5m Technology Strategy Board and Advantage West Midlands funded LCV trial (CABLED). This involves 108 electric, hybrid and hydrogen fuelled vehicles in Coventry and Birmingham being tested, over a twelve month period, by members of the public on the region‘s public highways  A £12.5m Vehicle Lightweight Technologies programme  A £10.2m bespoke intelligent transportation systems test facility – innovITS ADVANCE – with key partners MIRA (Motor Industry Research Association) and TRL (Transport Research Labs)  A £10m Vehicles Customer Interface Technologies programme  A £4.5m Niche Vehicle Research and Development programme – the Niche Vehicle Network (NVN) which brings together independent vehicle manufacturers, system suppliers, automotive technology companies and HEIs, to collaborate on the innovative application of technologies in low-volume vehicle production.

Collectively, it is anticipated that this concentration on advanced automotive engineering activity has the potential to provide a significant boost to the regional economy. In particular, it aims to create new and safeguard existing automotive jobs through transition to LCV manufacturing, support existing supply chain businesses to meet the changing requirements of vehicle manufacturers, and upskill employees through development of new technologies and a knowledge exchange platform for low carbon skills. In doing so, broader economic outcomes are expected to include increased gross value added for the region and the attraction of new overseas investments. It is clear, therefore, that such projects and initiatives offer West Midlands automotive sector businesses the chance to avail themselves of knowledge transfer and business support opportunities.

It is important to note that activity of this scale and breadth has been made possible through the co-ordinating role of the Regional Development Agency, bringing together multiple layers of government and other key stakeholders (e.g. business and Universities) to access funding and deliver projects in a collaborative rather than competitive way. Although much of the activity is ongoing, the recent abolition of RDAs (March 2011) has seen the facilitation and co-ordination of future activity passed from the regional to local level through emerging Local Enterprise Partnerships (LEPs). Whilst LEPs have the advantage of significant private sector involvement, they lack the resources (both funding and capacity) previously available to RDAs to invest in economic development and, therefore, need to develop more creative 61 ways of encouraging and supporting the types of activity noted above, including through securing funds from the European Union and the UK Technology Strategy Board (TSB). This highlights an important contradiction in Government policy. Whilst the responsibility for delivery has been ‗localised‘ the funding mechanisms to enable delivery have been centralised as well as significantly reduced. Moreover, whilst key stakeholders remain committed to the low carbon economic area agenda, as expressed through LEP strategies across the West Midlands, the lack of a co-ordinated regional approach to support the economic development of the automotive cluster is a concern. The added value of regional stakeholders working together was evident during the recent recession through the work of the West Midlands Taskforce in its dedicated support of key strategic sectors (see Bailey and Berkeley, 2010).

4.4 Strengths, Weaknesses, Opportunities and Threats for the West Midlands automotive sector

4.4.1 Strengths  Despite decades of consolidation and contraction, the West Midlands automotive sector retains a strong manufacturing presence, including volume premium brands and niche vehicle makers.  The region is recognised nationally and internationally as the key UK centre for automotive skills and production, and has a strong manufacturing culture.  Through the presence of both major and niche producers the region benefits from expertise in body manufacture, including use of lightweight materials.  The region has a depth and diversity of automotive suppliers, being home to approximately 1,500 Tier 1, 2 and 3 companies.  High quality engineering services sector well integrated with the major global players.  Research and development (especially JLR) and testing facilities (MIRA).  A supportive public policy framework, albeit currently in a state of transition.

4.4.2 Weaknesses:  The regional automotive sector remains dominated by low value ‗component‘ 62 manufacturing vulnerable to globalisation pressures.  Limited local control owing to foreign ownership of most of the major manufacturers and suppliers located in the region.  Limited investment and a comparative lack of research and development activity compared to competing ‗Automotive regions‘ elsewhere in Europe.  A deficit of electronics firms to support developments in new high value vehicle technologies.  An aging workforce and a diminishing skills base with graduates school leavers showing reluctance to enter the industry.  Productivity in many plants is below industry standards and firms suffer from comparatively high costs, for example for labour.  Numerous high profile plant closures over the past decade present an image of a regional automotive sector in decline.

4.4.3 Opportunities:  Investment by major suppliers in manufacturing or assembly facilities, particularly related to the exploitation of new and emerging technologies (e.g. low carbon vehicles).  Emergence of new overseas markets for premium vehicles manufactured in the region (e.g. China).  Expansion of domestic and overseas markets for niche vehicles, including for alternatively fuelled vehicles.  Development of new engineering solutions to keep pace with a supra-national policy framework bringing forward ever more stringent environmental and safety regulations.

4.4.4 Threats:  Redirection of investment and production by foreign owned manufacturers away from the region, with a significant negative knock-on impact on the supply-chain.  The challenge of transition to mass low carbon automobility given limited domestically controlled research and development capability in the region.  Continued economic fragility following the most recent recession, with suppressed domestic demand compounded by a decreasing share of the European export 63 market.  Relative lack of engagement with high value technologies where labour costs are less critical.  Saturated Western markets and over-capacity in the industry globally.

REFERENCES

Advantage West Midlands (AWM) (2007) Automotive Cluster 3 Year Plan 2008-11, Advantage West Midlands, Birmingham.

Advantage West Midlands (AWM) (2010) West Midlands manufacturers set to benefit from innovation service (http://www.advantagewm.co.uk/news-media- events/news/2010/westmidlandsmanufacturerssettobenefitfrominnovationservice.as px).

Advantage West Midlands (AWM) (2011) Low Carbon Advanced Automotive Engineering.(www.advantagewm.co.uk/case- studies/2010/lowcarbonadvancedautomotiveengineering.aspx).

Bailey, D. and Berkeley, N. (2010) Evaluation of the West Midlands Task Force. Coventry University Applied Research Centre in Sustainable Regeneration for Advantage West Midlands.

Bailey, D. and MacNeil, S (2010) Changing Policies for the Automotive Industry in the UK 64 West Midlands: An open Innovation Model. Coventry University Business School

Begley, J. and Donnelly, T. (2009) ‗Financial crisis and the automotive sector‘. Paper presented at the 17th GERPISA annual conference, Paris.

Birmingham and Solihull Learning and Skills Council (2003) ‗Skills, recruitment and training issues in the West Midlands engineering and automotive sectors‘, Research Programme 2002–2003, Summary Report, 2003.

Clements, B. and Moore, S. (2009) SPEED Final report. The University of Wolverhampton, March 2009

Dicken, P. (2011) Global Shift: Mapping the Changing Contours of teh World Economy [6th Edition]. Sage, London.

Department of Trade and Industry (DTI) (2006) MG Rover Task Force: Final Update Report (http://www.bromsgrove.gov.uk/cms/PDF/CD1.7%20mg-rover-task-force-final- report.pdf)

Ekos Consulting (UK) Ltd. (2010) Evaluation of AWM's Cluster Programme 2002/03-08/09 Part 1- Baseline and Performance: A Report to Advantage West Midlands, January.

European Monitoring Centre on Change (2004) The automotive cluster in the West Midlands, UK (http://www.eurofound.europa.eu/emcc/publications/2004/ef0493en2.pdf).

Gomes, E., Donnelly, T., Morris, D. and Collis, C. (2010) Mergers and Acquisitions as strategic Methods of Business Development in the Global Automotive Industry: An Analysis of Five Cases, Edwin Mellon Press, New York

Howleg, M. (2009) The Competitive Status of the UK Automotive Industry. PICSIE Books, Buckingham.

Innovation Vouchers (2010) Aeristech – Feasibility Study (http://www.innovationvouchers- wm.co.uk/case-studies-round-6/transport/). 65

MacNeil, S & Liu, X (2003) Innovation Networks and Regional Clusters in the Automotive Sector: The UK West Midlands (http://www.lowcvp.org.uk/assets/reports/Innovation%20Networks%20and%20Regi onal%20Clusters%20in%20the%20Automotive%20Sector%20- %20The%20UK%20West%20Midlands.pdf).

Manufacturing Advisory Service (MAS) (2011) Bevan Case Study (http://www.mas- wm.org/case-studies/Bevan.pdf).

Napier (2011) Businesses To Benefit From Shorter KTPs (http://www.napier.ac.uk/2kT/knowledgetransferpartnerships/Pages/ShortKnowledg eTransferPartnerships.aspx)

New Automotive Innovation and Growth Team (NAIGT) (2009) An Independent Report on the Future of the Automotive Industry in the UK, Department for Business, Enterprise and Regulatory Reform, London.

Niche Vehicle Network (2011) E Vito Taxi Project (http://www.nichevehiclenetwork.co.uk/projects/anv-evito-taxi-project)

Regenesis Consulting Ltd. (2007) Evaluation of the Innovation Networks Service – a final report.

Rosenfield, S. (2002) A guide to Cluster Strategies in Less Favoured Regions. European Commission, Brussels.

Department of Trade and Industry (DTI) (2006) MG Rover Task Force: Final Update Report (http://www.bromsgrove.gov.uk/cms/PDF/CD1.7%20mg-rover-task-force-final- report.pdf)

Data Sources

OICA International Organization of Motor Vehicle Manufacturers www.oica.net/

ONS UK Office for National Statistics www.ons.gov.uk/

SMMT Society of Motor Manufacturers and Traders www.smmt.co.uk/ 66 BIS UK Innovation Survey 2009, Department for Business, www.bis.gov.uk Innovation and Skills

UKSPA UK Science Parks Association www.ukspa.org.uk

67

Part Two: Saxony-Anhalt Regional Mapping Report

Dr.-Ing. Jürgen Ude, Melanie Driesner and Udo Riedel IGZ Innovations und Gründerzentrum Magdeburg GmbH

5.0 Identifying the current technology park situation

5.1 Mitz I+II Merseburg Web address: www.mitz-merseburg.de

Location: mitz I: Merseburg mitz II: ValuePark® Schkopau Brownfield/Greenfield: mitz I: former barracks grounds mitz II: industrial park of Dow Olefinverbund GmbH Date of Establishment: 01/1991

Ownership: City of Merseburg, Saalekreis district, City of Schkopau, Saalesparkasse, POLYKUM e.V., mitz e.V. foundation Partners: DOW Olefinverbund GmbH, InfraLeuna GmbH, TOTAL Raffinerie Mitteldeutschland GmbH, Fraunhofer PAZ, GMBU e.V. , Chamber of Industry and Commerce Halle-Dessau, Chamber of Crafts Halle (Saale), Polymer Competence Centre Halle-Merseburg, … regional SMEs and public boddies Park Size: about 5.000 m2 rentable area

Shared Services: Renting out of laboratory and office space, counselling for business start-ups, counselling in technical und economical items, project management and counselling, providing contacts and co operations, transfer of knowledge and 68 technology Links to HE: UAS Merseburg, Magdeburg-Stendal University for Applied Sciences, Martin-Luther University of Halle-Wittenberg, HTWK Leipzig, KAT competence network … Tenant companies ca. 30 + 1 R&D institution

Occupancy rate: ca. 85%

Key sectors: Chemical engineering und plastics technology, process engineering and environmental technology, modern IKT, business related services

5.2 Innovations- und Gründerzentrum Altmark, BIC Altmark GmbH

Web address: www.bic-altmark.de

Location: Hanseatic City of Stendal

Brownfield/Greenfield: former military base

Date of Establishment: 10/1992

Ownership: Stendal district, City of Stendal, support group of the Magdeburg-Stendal University of Applied Sciences Partners: regional companies, Chamber of Industry and Commerce, Chamber of Crafts, various associations Park Size: about 5.000 m² rentable area

Shared Services: Renting out of office spaces, counselling for business start- ups, project management and counselling, providing contacts and co operations Links to HE: various, main focus Magdeburg-Stendal University of Applied Sciences Tenant companies about 40

Occupancy rate: about 75 % 69

Key sectors: renewable energies, counselling of business start-ups, food industry, vehicle and mechanical engineering

5.3 Zweckverband TechnologiePark Mitteldeutschland, Bitterfeld-Wolfen Web address: www.technologiepark-mitteldeutschland.de

Location: Bitterfeld-Wolfen

Brownfield/Greenfield: Greenfield

Date of Establishment: 2005

Ownership: City of Bitterfeld-Wolfen, City of Sandersdorf-Brehna, City of Zörbig Partners: no

Park Size: about 600 ha

Shared Services: Renting out of commercial spaces, various services, guarding

Links to HE: no

Tenant companies more than 20

Occupancy rate: no information 70 Key sectors: photovoltaic industry, logistic

Notice: The main focus of the TechnologiePark Mitteldeutschland is on the renting out of commercial spaces for innovative firms.

5.4 Technologie- und Gründerzentrum Jerichower Land GmbH Web address: www.tgz-jerichower-land.de

Location: Genthin

Brownfield/Greenfield:

Date of Establishment:

Ownership: Jerichower Land district, City of Genthin, support group Technologie- und Gründerzentrum Jerichower Land e.V. Partners: tti Technologietransfer und Innovationsförderung Magdeburg GmbH, ESA Erfinderzentrum Sachsen-Anhalt GmbH Magdeburg, ESA Patentverwertungsagentur Sachsen-Anhalt GmbH, Stabstelle Integrations-koordination des Landkreises Jerichower Land Park Size: about 1.500 m²

Shared Services: Renting out of office spaces, counselling for business start- ups, project management and counselling, counselling of electronic commerce projects Links to HE:

Tenant companies about 15 71

Occupancy rate:

Key sectors:

5.5 Innovations- und Gründerzentrum im Landkreis Harz GmbH Web address: www.igz-wr.de

Location: Wernigerode and Blankenburg

Brownfield/Greenfield:

Date of Establishment: 1992

Ownership: Harz district, City of Wernigerode, Harzsparkasse, City of Blankenburg, City of Ilsenburg Partners: Hochschule Harz University of Applied Sciences, Investitionsbank Sachsen-Anhalt, Harz Region Development Corporation – Harz AG, Chamber of Industry and Commerce Magdeburg, Chamber of Crafts Magdeburg Park Size: about 2.500 m²

Shared Services: Renting out of office spaces, counselling for business start- ups, project management and counselling, providing contacts and co operations, office services Links to HE: Hochschule Harz University of Applied Sciences

Tenant companies about 35 72 Occupancy rate: about 94%

Key sectors:

5.6 Technologie- und Gründerzentrum Halle GmbH Web address: www.tgz-halle.de

Location: Halle (Saale), 8 several Locations

Brownfield/Greenfield: both

Date of Establishment: 1993

Ownership:

Partners: Max-Planck-Institut, Fraunhofer Institut, Martin-Luckner- Foundation Park Size: 25.000 m²

Shared Services: Renting out of office spaces and laboratories, counselling for business start-ups, project management and counselling, providing contacts and co operations Links to HE: Martin-Luther-University Halle-Wittenberg

Tenant companies about 50

Occupancy rate: 73

Key sectors: Biotechnology, Nanotechnology, Informationtechnology, Medicine

5.7 Technologie- und Gründerzentrum Bitterfeld-Wolfen GmbH Web address: www.tgz-chemie.de

Location: ChemiePark Bitterfeld-Wolfen

Brownfield/Greenfield: Brownfield, former ―VEB Chemiekombinat Bitterfeld‖

Date of Establishment: 11/1992

Ownership: Anhalt-Bitterfeld district, City of Bitterfeld-Wolfen

Partners:

Park Size: About 10.000 m²

Shared Services: letting of office spaces, counselling for bussiness start-ups, projektmanagement and counselling, providing contacts and cooperations, further education Links to HE:

Tenant companies about 30

Occupancy rate: about 79 % 74

Key sectors: Photovoltaic, renewable resources and materials, chemistry

5.8 IGZ Fügetechnik Halle(Saale) Web address: www.igz-fuegetechnik.de

Location: Halle (Saale)

Brownfield/Greenfield: Brownfield

Date of Establishment: 11/2004

Ownership: SLV Halle GmbH

Partners:

Park Size: about 5.000 m²

Shared Services: letting of office spaces, counselling for business start-ups, project management and counselling, providing contacts and co operations, further education, office services Links to HE:

Tenant companies about 15

Occupancy rate: about 98 % 75

Key sectors: IT, Automation, environment engineering, laser technology

5.9 Innovations- und Gründerzentrum Schönebeck GmbH, INNO-LIFE Web address: www.igz-inno-life.de

Location: Schönebeck(Elbe)

Brownfield/Greenfield: Brownfield

Date of Establishment: 04/2006

Ownership:

Partners: tti Technologietransfer und Innovationsförderung Magdeburg GmbH (technology transfer and innovation support), University of Magdeburg, Centre for Neuroscientific Innovation and Technology, Chamber of Industrie and Commerce Magdeburg, Chamber of engineers, Park Size:

Shared Services: letting of office spaces, counselling for business start-ups, project management and counselling, providing contacts and co operations, further education, office services Links to HE:

Tenant companies 76

Occupancy rate:

Key sectors: health and social services

5.10 Innovations- und Gründerzentrum Altmarkkreis Salzwedel Web address: www.gruenderzentrum-salzwedel.de

Location: Salzwedel

Brownfield/Greenfield:

Date of Establishment: 02/2000

Ownership: Salzwedel district

Partners: Magdeburg-Stendal University of Applied Sciences

Park Size: about 1.400 m²

Shared Services: letting of office spaces, counselling for business start-ups, project management and counselling, providing contacts and co operations, office services Links to HE: Magdeburg-Stendal University of Applied Sciences

Tenant companies about 15

Occupancy rate: about 90 % 77

Key sectors: IT, technical services, tourism services

5.11 biotech Gründerzentrum Gatersleben GmbH Web address: www.startupbiotech.de

Location: Gatersleben

Brownfield/Greenfield: brownfield

Date of Establishment: 1999

Ownership: Gesellschaft für Wirtschaftsförderung Aschersleben-Staßfurt mbH (organisation for economic development), real estate company ASTA Grundstücksgesellschaft mbH Partners: Leibniz institute for plant genetics and crop plant research, Inno-Planta e.V. (plant biotechnology), Park Size: about 3.300 m²

Shared Services: letting of office spaces, counselling for bussiness start-ups, projektmanagement and counselling, providing contacts and cooperations, project financing, facility managment Links to HE:

Tenant companies about 10

Occupancy rate: about 65 % 78

Key sectors: plant research, biotechnologies

5.12 Gründer- und Gewerbezentrum Halberstadt GmbH Web address:

Location: Halberstadt

Brownfield/Greenfield: brownfield

Date of Establishment: 01/2001

Ownership: Harz district

Partners:

Park Size: about 1.400 m²

Shared Services: letting of office spaces, providing contacts and cooperations

Links to HE:

Tenant companies about 10

Occupancy rate: about 90 % 79 Key sectors:

5.13 Innovations- und Gründerzentrum Magdeburg GmbH Web address: www.igz-md.de

Location: Barleben and Magdeburg

Brownfield/Greenfield: Greenfield

Date of Establishment: 05/1991

Ownership: City of Magdeburg, Stadtsparkasse Magdeburg, Chamber of Industry and Commerce Magdeburg, University of Magdeburg Partners: tti Technologietransfer und Innovationsförderung Magdeburg GmbH (technologie transfer and innovation support), ESA Erfinderzentrum Sachsen-Anhalt GmbH Magdeburg, University of Magdeburg, Chamber of Industry and Commerce Magdeburg, Centre for Neuroscientific Innovation and Technology, Think Tank ―Wissenschaftshafen‖ Park Size: about 25.000 m²

Shared Services: Renting out of office spaces, counselling for business start- ups, project management and counselling, providing contacts and co operations, office services Links to HE: University of Magdeburg, Fraunhofer Institute of factory operation and automation, Magdeburg-Stendal University of Applied Sciences 80 Tenant companies about 75

Occupancy rate: About 90%

Key sectors: automation, environnent technologies, information technologies, automotive

6.0: Resume and overview of experiences from other EU-Projects and current projects

During the last 10 years the automotive industry became more and more important for the region of Saxony-Anhalt. Although there does not exist an OEM (original equipment manufacturer within the region there are more than 250 companies working for and more than 18.000 jobs are depending on the automotive industry. OEM´s can be found in the adjoining federal states like Thuringia, Saxony, Lower Saxony and Brandenburg. The Innovation- and Founders Center (IGZ Magdeburg GmbH) was founding member of the automotive supplier network MAHREG Automotive which participated in several European project over the last few years to learn from other automotive partners and networks. Also several companies located within the IGZ Magdeburg are working for the automotive industry e.g. in the field of rapid prototyping, plastics, surface treatment or test systems. In order to strengthen the region and develop this business location into a place attractive for investors, people who live and work here, as well as clients of regional companies the IGZ Magdeburg supports the establishment of new technologies and innovative companies.

6.1 Lessons and good practices from current projects 81

6.1.1 Support of incubators and founders to make them more successful and self- confident (since 2008)

Since 2008 the IGZ Magdeburg is running a project for founders in order to support them while starting their businesses, making them more self-confident, improving their networking abilities and giving them a broad variety of tools be become more successful and keeping their business on the market. So far 225 founders were able to participate within the qualification project, receiving qualified further education without charge from regional experts (like attorneys, accountants and competence carriers in marketing and founding policy).

Section Indication of content 1 Title of qualification of founders practice 2 theme support of incubators and founders

3 Objectives of To make new founders more self-confident, more successful, the practice prevent closing-up of young businesses to add new and needed functions (resources, structure, timing) 4 Location Germany (Saxony-Anhalt, region Chemnitz - Zwickau) 5 description origin IGZ Magdeburg GmbH timescale about one year per qualification period bodies involved European social fund, federal state Saxony-Anhalt, LVWA, regional / qualification institutions, Ego-pilots, (regional board with: city of implementation Magdeburg, chamber of trade and commerce, process and founders receive 200 hours of basic qualification and 100 hours of detailed additional qualification in fields like, tax law, communication, content of the management psychology, business plan, financing, marketing, office practice organisation …, the qualification is free of charge for the founders and additionally they receive up to 100€ per qualification day as compensation because they can´t work on that day/ travel expenses/ or because they have to hire someone else for that day. The qualification is on one day per week (8 hours) so the entire course takes 25 weeks for the basic qualification and 12 weeks for the additional qualification. 82 legal The progamm is for founders, who´s founding date is not older than framework 3 years, they do it as main profession and the payment depends on if the founders already receives other financial support or not

financial teachers/experts receive up to 7€ per hour per participant, founders framework receive up to 100€ per qualification day in basic qualification and up to 50€ per qualification day in additional qualification, the IGZ as organisator receives 90% of funding for the management work (staff costs, PR, travel costs ...)

6 Evaluation possible since June 2008 we were able to qualify 228 founders with positive demonstrated feedback from participants, the next founders already wait for further results (e.g. courses to start through indicators) possible for qualified, self-confident founders who hopefully are more success factors successful in their young business than without the qualification, good networking contacts especially even after the courses they have a chance to meet e.g. during founders-"Stammtisch" (regular meetings between founders talking about their problems or hearing speeches by experts about certain topics e.g. tax law, work law, marketing ...)

difficulties payment of experts/teachers and organization staff is depending on encountered a good participation rate of the course participants, 10% own financing; and it is difficult to keep track of the founders after e.g. 2 year checking if they are still on the market 7 lessons the positive feedback from the course participants reflects the learned from necessity of such qualification measures in order to have self- the practice confident and competent entrepreneurs 8 contact IGZ Magdeburg GmbH information 9 information website www.igz-md.de (EXISTENZGRÜNDER) documents flyer (only in German)

6.1.2 Establishing an institute of Automotive Expertise (since 2008)

Section Indication of content 83 1 Title of Establishing an institute of Automotive Expertise practice 2 practice As reaction on the economic crises 3 Objectives of As reaction on the economic crises the federal ministry of Saxony- the practice Anhalt ordered an external study analysing the cluster situation within Saxony-Anhalt with a connected SWOT-analysis. The result of this study were 11 existing and functioning clusters e.g. in the field of food, special mechanical engineering, chemical industry... One good practice cluster identified was also the automotive Cluster MAHREG Automotive, with more than 160 members and a potential of 250 companies in Saxony-Anhalt working for the automotive industry (18.000 job related to the automotive industry). Here scientific institutions and companies work together within projects, share staff to a certain amount, share educational machines, organise joint both presentation during fairs and technical events. But the study pointed out that a research and development institute is still missing within our region for the automotive field eventhough also the Otto-von-Guericke university does have a research focus on automotive. Taking the results of the study as recommendation for future development and activities the Ministry followed the goal to establish such a missing research and development institute. 4 Location Germany (Saxony-Anhalt, Magdeburg and Barleben)

5 Detailed Looking at the objective of realising such an Institute of competence description of for AutoMobility (IKAM) the Ministry requested at first a concept as a the practice guideline for the realisation. The automotive cluster as well as the regional companies, research institutions like university or Fraunhofer and the federal government of Saxony-Anhalt were involved in the concept phase. Within the concept future trends were being presented, necessary equipment, locations, staff and timescales as well as expected and planned outputs (improve innovation capability, securing and creating jobs, improve location attractiveness, regional development, being on the start after the crises, providing affordable high-technology to SME´s, improve practice-oriented university education ...)

origin Saxony-Anhalt timescale 3 years (and still ongoing) bodies involved university, chamber of trade and commerce, state Germany, federal / state Saxony-Anhalt, Automotive cluster, companies implementation

process and With the existing concept it was possible to bind 34.50 Mio. Euros of detailed funding for the creation of such an institut. 24.5 Mio. from the content of the "Konjunkturpake II" of the State of Germany and 10 Mio. from the practice federal State of Saxony-Anhalt being used for rebuilding of an existing location within an innovation and founders center, new building of a technicum hall next the the Innovation center for heavy weight machinery and one new building at the campus site of the university in Magdeburg. With growing progress a new association was being founded (IKAM GmbH = Ltd.) with university and chamber of trade and commerce as equal share holders. Commonly 84 they decided within regular (every two weeks) with in the construction meetings, marketing activities, equipment of the growing laboratories also answering questions like buying land, employees, R&D projects

legal founding of a new association framework

financial 34.5 mio € framework 6 Evaluation results securing jobs, creating new high-quality jobs, improve education level possible success factors difficulties encountered

7 lessons do to the fact that the project is still in the realisation phase the final learned from lessons learned still have to be determined, but for the moment it is the practice of specific value for the university and their students to have access to modern laboratory equipement, direct contact to companies working within this field looking at bachelor reports, internships and so on. But also for the companies especially SME´s it is an advantage to have access to these modern laboratories by using them on a timely basis, without having to invest in expensive machinery and equipment themselfes including all risks (bank credits, amortisation, insurance ...) 8 contact Dr. Jürgen Ude (manager IGZ Magdeburg GmbH) and or Dr. Stefan information Schünemann (manager IKAM GmbH) 9 Other possible interesting information website www.ikam-md.de (still developing) documents concept

 What do we have reached with the IKAM so far?

Thinking strategically - The Institute of Automotive Expertise – IKAM is supporting, coordinating and advancing the automotive industry‘s research and development in keeping with our slogan:

85 “Automotive expertise converges here.“

Together with the automotive industry, suppliers and service providers, the researchers at IKAM are playing a pivotal role in shaping the innovations for twenty-first century vehicles. By 2020, Saxony-Anhalt will have been transformed into a region of innovative mobility. Strategic partnerships with original partners‘ expertise and defi ned objectives in research as well as product development and marketing are the keys to success.

 Generating Effective Innovations

Companies from the automotive and automotive supply industry are researching and developing the cars of tomorrow together with academic experts at the Institute of Automotive Expertise - IKAM. The results of their research and development enter into new components, efficient systems and innovative manufacturing technologies. Supporting training activities assure that the labor force is highly qualified.

 Developing Sustainable Mobility

IKAM provides the technologically changing automotive industry long-term partnerships to develop future technologies with promising prospects for commercialization. This collaboration develops potentials for value added by concentrating on advanced concepts of energy conversion, economizing, state-of-the art and sustainable manufacturing. We consider the performance, reliability and environmental compatibility of new vehicles to be the keys to the future.

IKAM specializes in:  Green drive systems  Electric mobility  High performance materials  Lightweight construction  Inspection and testing systems  Industrial engineering

Future drive systems and electric mobility are priorities in our research and development of environmentally compatible vehicles with enhanced conventional systems as well as hybrid and electric vehicles. New technologies for intelligent and hybrid materials and their 86 integration in products are being developed to attain the requisite performance and enhanced efficiency. Our comprehensive range of expertise from basic development through technology transfer and from product through process development gives us a significant edge.

The Institute of Automotive Expertise – IKAM provides you numerous opportunities to research, develop and employ products, manufacturing technologies and services through our:

 Contract research  Research services  Collaborative research and development  Research and development management  Development of research project concepts, e.g. in funded programs  Professional support and management of development consortia  Technology validation  Technology transfer management

 Technical services, including testing and inspection strategies

Labs excellently outfitted with advanced equipment and systems are on hand to meet common challenges and goals in individual user consortia.

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7.0 Lessons and good practices from previous projects

7.1 NEAC - Network of European Automotive Competence (2005-2007) In an increasingly global and competitive market, the automotive industry faces an ongoing battle to adapt its technology to changing needs. This applies to suppliers as well as to system and vehicle producers. Regional SMEs (small to medium-sized enterprises) belonging to the auto-supply chain have looked for ways to overcome these challenges. For many regions, the establishment of clusters focusing on specific fields of competence has proven to be a useful tool, providing an interface between regional development strategies and key economic players. Until now these efforts have been mostly region specific. There has been little in the way of an interregional strategy at the European level which could help European automotive regions to work together to increase their global competitivity.

The possibility to use the benchmark tool within the project has helped all participating 88 partners and SME´s to understand the competences and excellence of their own supply base within the context of the EU.

Section Indication of content 1 Title of Benchmark of automotive companies practice 2 Precise Within the NEAC-project Saxony-Anhalt was able to use and access the theme/issue winning moves benchmark database with more than 19.000 updated tackled by the company entries. practice 3 Objectives of Benchmark / market research the practice 4 Location

5 Detailed The main tasks where to interest companies in getting involved into such description of a benchmark process, collect company data, comparing the data with the the practice help of the database against other companies and provide each company with a feedback report and action plan. By doing this not only the company received a clear picture of their situation in the four elements: finances, customer care, processes and learning growth based on the scorecard method but also the region got access to the cluster picture of the participating EU regions. Winning Moves provided every participating region 25 benchmark credits.

Origin UK (Winning Moves benchmark database) Timescale Feb 2005- Dec 2007 bodies involved 10 European regions + Russia (also involved Wroclaw region, Welsh / Automotive Forum and Birmingham Chamber of Trade and Commerce) implementation process and within the NEAC-project all participating regions had the possibility to do detailed 25 benchmarks (each region) after being professionally trained and content of the supported by a well functioning help desk hotline, being informed about practice how to collect the correct and relevant data from the companies, the companies in return received a well structured benchmark report (with traffic light symbolic green=good, yellow=attention, red=to be improved), with the benchmark reports the companies received a better understanding about their company based on a balanced scorecard method and where able to compare their own company with international or regional companies of the same NACE-code. 89

6 Evaluation results improved balanced score card figures possible Benchmark with other companies, better understanding of own position, success factors strengths and weaknesses difficulties financial aspects and During the entire project period there existed (not encountered only in Saxony-Anhalt) a hesitant position of the SME´s regarding the trust in the benchmark system and the effort for the collection of the data. The NEAC meetings showed that other regions had similar experiences so that in total not all credits where used within this component. Therefore MAHREG Automotive created a flyer in 2007 for better understanding which helped during the decision finding and argumentation with the SME´s for the rest of the project time.

7 lessons Via NEAC MAHREG Automotive was very well able to get a good learned from overview on existing automotive cluster activities within the 10 project the practice partner regions so the cluster initiative itself was able to gain knowledge and contacts which helped to develop new ideas. Those companies who participated in the benchmark component where able to receive a direct benefit through the analysis of their company against their industry/branch. But the number of companies which could be reached so far is not satisfying. Future intentions/ projects should definitely have a stronger focus and output for the SME´s. The designed and developed tools within NEAC could be a good start but … positive to mention is the fact that those companies who were able to do a re-benchmark really improved in critical fields e.g. from red to yellow or yellow to green after one years period.

8 contact MAHREG Automotive (Sachsen-Anhalt Automotive e.V. ) Steinfeldstr. 3, information 39179 Barleben www.mahreg.de 9 Other information

Website www.winningmeasures.com Documents http://www.interreg3c.net/sixcms/detail.php?id=7523&_currfloaterlang=en

After the project termination of NEAC the results were transferred to the EASN European Automotive Strategy Network (https://www.xing.com/net/easn) http://ebn24.com/fileadmin/images/Sonderpublikationen/Automotive_Clustering_in_Europe/P ala_Weken/032-037_Pala_Weken.pdf

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COMIN-CLUST (2005-2006)

7.1.1 Operational Guideline for Cluster Management contains 10 guidelines/GP´s/tools based on experiences within the Automotive Sector but also adaptable for other sectors (separate document already provided)

These Operational Guidelines are one of the outcomes of the subproject COMIN-CLUST (Strengthen the COMpetitiveness of SME by INternationalisation of Business on CLUSTer level). COMIN-CLUST was a European funded project in the frame of the Interreg III C program. The project is part of the Regional Framework Operation touriSME which has been developed and implemented in partnership of the European regions Saxony-Anhalt (DE), North-East of England (UK), Province Limburg (NL) and Comunidad Valenciana (E) and has been co-financed within the European INTERREG IIIC program.

The outcomes of COMIN-CLUST can be summarized in the following four topics:

1. Exchange of information, experiences, knowledge and ideas leading to an improvement in the innovation and managerial capabilities within the cluster initiatives. 2. Strengthen the ability of SMEs to co-operate on an international basis and assist them in their innovation process. 3. Establish a sustainable interregional co-operation by strengthening the partnership and inviting new partners to join. 4. Operational Guidelines for Cluster Management of the partnership as a common tool for increasing the success of cluster initiatives and the sustainability of the well developing partnership, which is open for other cluster initiatives.

The OG are a practical tool for the management and evaluation of cluster initiatives in the automotive sector based on a summary of the knowledge available, approaches, needs, and experience of the partners.

Section Indication of content 1 Title of Operational guidelines for cluster management automotive sector practice 91 2 Precise The following is a set of operational guidelines or recommendations theme/issue related to the three key activities involved in managing a cluster tackled by the initiative. These guidelines have been drawn and formulated in the practice COMIN-CLUST project meetings. These are the product of multiple interchanging experiences and constitute an opten list of key tools and methods a cluster manager should take into consideration when conducting cluster management activities. The following list should not be interpreted as a closed list of rules, but as a first effort. Although most of the guidelines can also apply to toher industrial sectors, the refer mostly to the experiences discussed and accepted from the project members in managing a cluster initiative in the automotive sector. Objectives of The Operational Guidelines for Cluster Management have been the practice developed as a common tool for increasing the success of cluster initiatives and their sustainability - being open for other cluster initiatives. 4 Location Common project between Saxony-Anhalt (Germany), North-East of England, Limburg (Netherlands), Valencia (Spain) Operational Guideline 1 (strategic processes)

theme a clear and up-to-date understanding of the competitive situation of the cluster is the first step

Objectives of At the end, the setting of objectives should be based on a the practice systematic analysis of the regional cluster profile, using a conceptional framework accepted by all cluster participants. -Starting with a well-understood and shared framework of analysis. -Reaching a common understanding of the key factors that determine competitiveness for the industries of the cluster. -Setting an on-going process of analysis, with periodic reviews of the cluster´s competitive situation and strategic reviews of the role of the cluster initiative within the cluster. -Taking into account the innovation strategy of the region, set by public or private organizations. Location Limburg (Netherlands), Valencia (Spain) possible Comunidad Valencia: The Strategic Study of the automotive sector demonstrated in Valencia served as a basis for the creation of AVIA and two results (e.g. support groups (Universities and Technical Centers) for the through automotive industry. indicators) Limburg: Periodical studies on the development, composition and strengths of the automotive industry in The Netherlands. possible up-to-date knowledge, better marketing and promotion of the region, success better awareness of trend development factors difficulties A common mistake is to set a CI´s framework without taking into encountered consideration the cluster´s own strengths, weaknesses, opportunities and threats. (SWAT) lessons The project partners received a state-of-the art of automotive learned from activities within the project regions, found new international the practice business partners, have more self-confidence Operational Guideline 2 (strategic processes) 92 theme formally define the cluster initiative strategic positioning, its mission statement and its role in strengthening industry competitiveness Objectives of Strategy formulation should be clear and action-oriented in a way the practice that will allow to deploy CI's plans and projects. This exercise will favor and facilitate the follow up of the cluster initiative's goals and control its real contribution to cluster competitiveness. possible MAHREG collaborates with regional decision markers (Federal demonstrated Ministry of Education and Research and Ministry of Economics and results (e.g. Labor) in order to define commonly the strategic development and through to determine regional development emphases. indicators) MAHREG's involvement in supra-regional organizations and activities. MAHREG is a member of the automobile cluster East Germany, ACOD, and holds beyond that intensive contacts to supra-regional organizations. ATC collaborates with the national government in order to define the joint strategy and focus areas for the automotive industry in The Netherlands. Strategies are developed on nation as well as on regional level. possible A formal and explicit strategy also serves as a key communication success tool, and can help in gaining the support needed from key public factors and private regional cluster's agents

Operational Guideline 3 (strategic processes)

Precise industries should hold - and play - a majority representation in theme/issue governing bodies of the cluster initiative tackled by the practice Objectives of The ultimate goal of CI is contributing to industry competitiveness, the practice so in order to maintain companies' interest and involvement within the cluster it is advisable that they have a majority position in the CI decision making process. possible ATC is an initiative of the Federation Holland Automotive. In this demonstrated federation government, industry associations, trade associations results (e.g. and major companies together prepare and discuss the industry through policy. The cluster manager co-operates active with a cluster board indicators) consisting of 3 persons: An industry representative, a research institute representative ans a representative of the regional development authorities. This structure ensures that the cluster organization is embedded strongly in regional policy and that the programs are relevant to the companies. possible CI's should be open organizations through which both local and success foreign players as well as public and private agents can contribute factors to industry competitiveness. difficulties According to the Global Cluster Initiative Survey, there is no encountered significant effect on CI's success if government picks the companies to be involved in the CI. Operational Guideline 4 (strategic processes) theme public funds are a legitimate part of the financial budget of the 93 cluster initiative, particularly at early stages of development Objectives of Cluster development has significant positive effects on regional the practice economic development, generating qualified employment, attracting foreign investment, etc. possible AIMME: Cooperation with programs supporting R&D and demonstrated cooperation from the regional government. results (e.g. MAHREG: InnoRegio as core of the cluster initiative. through ATC: Finance scheme relates on fundamental funding. indicators) possible In order to ensure the continuity of operations, it is important that success CI's will have self-funded and self-promoted projects that factors complement public founding Operational Guideline 5 (strategic processes) theme institutional build up has to be adapted to the life cycle of the cluster Objectives of The integration of people from outside of the companies the practice (Universities, Administrations), as part of the Cluster operation is desirable. It is recommended to involve these people in the configuration of the different commissions or working groups. - The client: Prioritise the service given to the client, providing a better response to his needs. - The Strategic objectives: Focus the processes of the CI in the activities that adds value and contributes to the fulfilment of the strategic objevctives.

- Processes orientation: Orient the organisation to the processes that have greater capacity to add value for the different agents. - Coordination: Consider a philosophy of "work in group", creating multidiscipline groups that provide CI more satisfactory results. The coordination of the groups will be essential to guarantee the fulfilment of the strategy of the CI. possible MAHREG developed from a InnoRegio initiative for network creation demonstrated towards a cluster initiative ATC a view on the future for the ATC results (e.g. could be the further development in the direction of an "Automotive through Institute" in which all cluster activities are interconnected. An indicators) eventual extension of only the CI (into full time organisation, etc) may create disadvantages such as a probable loss of sharpness and agility. Operational Guideline 6 (operational processes) theme a joint action plan should be formulated and deployed on a project basis, and executed by working groups Objectives of Project management should collaborate with industry involvement the practice through the creation of working groups. possible RTC collaborates continuosly with regional decision makers: demonstrated Nissan; Regional Automotive Academy; North East Productivity results (e.g. Alliance; Universities. European funded projects have enabled them through to identify common problems and share best practice initiatives. indicators) possible The strategic point of view of the OEM, is a relevant issue that must success be present during the planning and ejecution of the activities of the factors commissions. Operational Guideline 7 (operational processes) 94 theme relationship-building is an essential part of cluster management

Objectives of The objective is that the cluster initiative will be in a position to the practice positively influence the co-operation and competition processes between the actors involved. possible ATC sports a wide range of relationship building activities: ATC demonstrated Symposium, Magazine Promoter, round tables, "partner dinners". results (e.g. MAHREG organizes periodically a Innovation forums, where through companies met around relevant topics for the sectors. indicators) possible The scope of networking should be at regional and national level. success factors difficulties It is to be noted that the promotion of networking initiatives will only encountered have clear effect if aimed at results in inter-company co-operation and ultimately strengthening competitiveness and cluster growth. Operational Guideline 8 (operational processes) theme networking activities should go beyond regional scope Objectives of In determining the scope of networking it is important to balance the practice local and international dimensions. Being able to network with other cluster initiatives, particularly if those are of the same industry, has proved to be a critical success

factor for cluster development.

Location Germany (Saxony-Anhalt, Aachen region), Spain (Comunidad Valencia), Belgium, Netherlands possible MAHREG's involvement in supra-regional organizations and demonstrated activities. MAHREG is a member of the automobile cluster East results (e.g. Germany, ACOD; and holds beyond that, intensive contacts to through supra-regional organizations. indicators) MAHREG participating in international fairs and getting in contact with international partners. The latest international pilot project example within COMIN-CLUST was having joint booth presentations of partners from the Netherlands as well as from Saxony-Anhalt combined with joint activities such as common visitation of the Volkswagen plant as well as a warm welcome of the State Secretary of Saxony-Anhalt by Netherlands companies. MAHREG and Comunidad Valencia participate in the RFO Perspective 2007-2013 and in the network NEAC (Network of Automotive competence). ATC: Structural cooperation with CAR (Aachen region, Germany) and Flanders' Drive (Belgium); joint projects/events, automotive courses. tti and RTC are partners of the European Innovation Relay Centre (IRC) network since 1995, integrating their activities in the automotive field in the frame of the IRC network. Operational Guideline 9 (support processes) theme IT continues to offer growing possibilities for cluster management 95 Objectives of Information technologies provide new mechanisms and channels for the practice information exchange and managing knowledge within cluster companies. possible MAHREG: Internet Based Cooperation. demonstrated MAHREG and AIMME: NEAC benchmark tool. results (e.g. ATC: On-line database with companies, knowledge and technology. through Linked with database of German VDA and their cooperation indicators) platform possible The fact that most companies have incorporated internet-based success applications in company's processes makes the use of internet a factors more useful channel for cluster management. Operational Guideline 10 (support processes) theme cluster monitoring should measure both project execution and impact on competitiveness goals Objectives of Monitoring performance of cluster initiatives and its impact on the the practice competitiveness and growth of clusters is critical to assess the strategy execution. Controlling and measuring CI performance should include both internal performance indicators (such as efficiency in the use of resources, level of activity, deliverables, etc.) and cluster performance indicators (such as competitiveness, growth, R&D spending, etc.).

possible MAHREG: Publication of the Status report each year. demonstrated MAHREG has a sound management operative, with approved and results (e.g. structured processes that support the cluster development and the through activation of the innovation process. indicators) possible Due to this fact, it is important to differentiate cluster performance success indicators and those are closely related to the cluster initiative. factors

7.2 Conclusion and Summary

Check GP from WS and opinion

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8.0 Regional mapping of the automotive cluster

8.1 Automotive Supplier Industry in Saxony-Anhalt 8.1.1 Leaders in Production and Application

There is a little bit of Saxony-Anhalt in every car in Germany – whether it‘s an aluminium cast part under the bonnet, a plastic profile, chassis parts or electronic components. The IKAM Institute for Competence in Automobility provides the right conditions for advances in electric drive and storage technologies.

It is difficult to say exactly how many automotive components are being made in our region. One thing is certain: a whole lot of them do. Industry insiders know that it is impossible to find an automobile in Germany of which no part was built in Saxony-Anhalt. World class automobile manufacturers with production facilities just outside the 97 borders of the state number amongst the prominent customers of the nearly 250 supplier companies with more than 18,500 employees. A casting part from the Harz region is located under almost every hood on European streets. VW, BMW and Mercedes-Benz, for example, use know-how from Saxony-Anhalt for steering and gearbox components, light- metal motor-vehicle bodies and interior fittings. More than a hundred years of tradition stand behind this and their success stories. Saxony-Anhalt‘s automotive suppliers have the leading position within the competence cluster ―Aluminum– Alloy Development and Innovative Casting Processes‖ with the ACOD Automotive Cluster of Eastern Germany. In the light of the special strengths and experience in light-metal casting, the ACOD has given the cluster MAHRE G Automotive the lead role in research and development for the use of aluminum in vehicles.

8.1.2 Core competencies

 Light metal casting / Aluminium alloy casting  Plastics engineering  Engineering services  Powder metallurgy  High performance composites  Custom machines / Special purpose machinery manufacture  Lightweight construction

8.1.3 Optimal conditions for good links

Composite materials are of increasing importance in cars. We´ve known this in Saxony-Anhalt for a considerable amount of time. In Saxony-Anhalt, composites and hybrid applications are playing an increasing role in the industry. The system is simple, but cannot be transferred into production without targeted research. A minimum of two different materials are combined and the resulting composite has improved properties in comparison with its component parts. The automotive industry in particular has put its faith in carbon fibre reinforced, high-performance plastics. The 98 Fraunhofer-Gesellschaft operates a pilot plant centre for polymer synthesis and polymer processing (PAZ) at the Schkopau ValuePark. This has resulted in an expansion of the research and development capacity in the central German region and the creation of links between research facilities and the rest of the industry. Here, there is a perfect testing environment for tailor-made solutions involving raw materials synthesis, polymers and high-performance components.

8.1.4 Research infrastructure for automobile suppliers

 Otto-von-Guericke-University, Magdeburg Key area of research: Automotive with three pillars:

 Energy conversion and drive systems  Safety and comfort  Virtual engineering

 Institute for Factory Operation and Automatisation with the Virtual Development and Training Centre (VDTC), Magdeburg:

 Virtual engineering for planning, testing and operating technical and logistical systems  Virtual interactive training  Sustainable automobile production

 Creativity and Competence Centre Harzgerode (CCC) with its own testing space for the metalworking industry:

 Aluminium die casting demonstration laboratory with automated die casting cell  High-quality laboratory equipment for the analysis and evaluation of building components, forms and materials; including a scanning electron microscope, automatic polishing and filing equipment, testing machinery, x- ray equipment, measuring space 99

 Powder Metallurgy Competence Centre for the highly innovative production of metallic iron and non-iron building components; Core competencies:

 Metal powder manufacture/material technology  Sintering components and process  Metal injection moulding (MIM)  Sintering and surface technology  Welding wire production/thermal spraying

 “InnComposites” – Fibre Composites Innovation Centre, Haldensleben

 Fibre composites engineering

 Production and analysis of composite profiles and components, as well as other materials  Close cooperation with growth centre ALFA – Allianz Faserverbunde (fibre composite alliance) – tailor-made composite products for mass markets – Haldensleben

 Fraunhofer Institute for Mechanics of Materials IWM, Halle (Saale)

 Material and building component characterisation  Material modelling and simulation  Interface and surface technology

 Still in development: Institute for Competence in Automobility (IKAM) in Magdeburg-Barleben

 This research institute, planned by the state, the Otto-von-Guericke University in Magdeburg and business representatives, is intended to bring 100 together all phases of innovation under one roof through close cooperation between business and science: from basic research and application-based processing of new insights to industrial research.

8.1.5 Key topics of research and development

 Lightweight construction– technologies for lightweight, precision vehicle components  Material development – technologies for high-performance materials including the development of new composite materials and the further development of aluminium materials  Development and testing of modern drive systems  Electromobility, electric drive and storage technologies

8.1.6 Partners

 Research and Development:

 Otto-von-Guericke-University Magdeburg  Martin- Luther- University Halle-Wittenberg  Anhalt University of Applied Sciences  Magdeburg-Stendal University of Applied Sciences  Harz University of Applied Sciences  Merseburg University of Applied Sciences  Max Planck Institute of Microstructure Physics Halle  Max Planck Institute for Dynamics of Complex Technical Systems Magdeburg  Fraunhofer Institute for Mechanics of Materials IWM Halle (IWM)  Fraunhofer Institute for Factory Operation and Automation IFF Magdeburg  Virtual Development and Training Centre VDTC (IFF Magdeburg)

 Network with a vision for innovations: 101 In Saxony-Anhalt, more than 250 component suppliers work successfully for the automotive industry. Their success is also a result of close networking and cooperation. The automotive network MAHREG Automotive was founded in 1999 as a network of excellence for the industry, service providers, equipment suppliers, research institutes and universities cooperate. It unites 170 companies and research facilities. The number of direct members has grown from seven at the beginning to around 70 today. Its business cluster management brings together competencies and resources whose innovations are sought-after all over the world.

 Particular Innovative Potential:

 Creativitäts- und Competenz-Centrum für Aluminium-Druckguss Harzgerode (CCC)  Produktentwicklungs-Innovationszentrum (PIZ) IF Rota  Transferzentrum Automatisierung im Maschinenbau e.V. Barleben (TAM)

8.1.7 Electric Mobility as a New Segment of the Supplier Industry

Electric vehicles are part of the future. By the year 2020, one million electric automobiles and so-called plug-in hybrid vehicles will be on the streets of Germany. The foundations for more environmentally friendly mobility are also being laid in Saxony-Anhalt. The state is already a trailblazer in the generation of renewable energy: Every third kilowatt hour is obtained from renewable sources; the largest amount is provided by wind energy. Storage concepts are needed to make green energy available on a longer term basis - and Saxony-Anhalt is ahead of the game here as well. Throughout the Federal State, electric mobility is seen as more than just a trend. The state government has announced its goal of developing the state as a center for regenerative storage technologies. A special challenge here will be storing energy in vehicle batteries when, for example, good wind conditions are present. Together with the Institute for Competence in Automobility (IKAM), additional preconditions will be met in the state in order to advance electric drive and storage technologies.

When it comes to opportunities for a ―mobile‖ future in the automotive industry, electric mobility is just as important as other kinds of research. Saxony-Analt wants to play a major role in this form of development and, with this in mind, it´s worth being in close proximity to important manufacturers and OEMs. Long-standing contacts and trustworthiness really do 102 pay off. Electricity is the fuel of the future and medium-sized companies in Saxony-Anhalt have put electric mobility right at the top of their list of priorities. There is huge potential for growth in this industry.

Economic and scientific partners are working together on the ―Harz.EE-mobility‖ project, where the network has put its faith into renewable energy. A fleet of electric cars fuelled by renewable energy shall prove that modern mobility is a sensible solution in rural and urban areas.

One of the leading manufacturers of test facilities for fuel cells, batteries and hybrid components, FuelCon AG from Barleben near Magdeburg, has supplied Evaluator C600 testing equipment to Volkswagen AG. With this testing equipment, fuel cell developers have a great deal of flexibility in testing the static and dynamic characteristics of PEM fuel cells. The goal her is the continuous optimization of fuel cell technology and the future entry of this technology onto the market.

8.1.8 Why Saxony-Anhalt? Location with potential2 - Five good reasons for investors in the automotive industry to get to know Saxony-Anhalt:

1. Location: Short distances due to the proximity to large automotive manufacturers and a central location 103 within both Germany and Europe. Factories of OEMs such as Volkswagen, Daimler, BMW, Opel and Porsche are all less than 100 miles away. 2. Close R&D cooperation: The best possible conditions for technological companies through optimum science and research structures and business cluster manangement by MAHREG Automotive (www.mahreg.de). 3. Productivity: Rise early, be more productive – thanks to a flexible and qualified workforce, Saxony-Anhalt has the highest productivity in Eastern Germany. The component supply industry has traditionally been a major part of the state´s industrial makeup. 4. Flexibility: Fast-track approval procedures and the swift realisation of projects with the support of authorities and ministries. 5. Promotion: Investment costs eligible for funding, graded according to company size.

2 Source: IMG Sachsen-Anhalt (investment and marketing association Saxony-Anhalt) and MAHREG Automotive

8.2 Automotive East-Germany ACOD

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8.2.1 Overview of 1st- and 2nd Tiers in East Germany Legend BB=Brandenburg BE=Berlin TH=Thuringia SN=Saxony MV=Mecklenburg Western Pomerania SA=Saxony-Anhalt

Federal State Company name city

SN a.i.m. all in metal GmbH Lengefeld SN A-Form AG Mildenau TH AGOR GmbH Hörselgau BB airkom Druckluft GmbH Wildau SN AIS Automation Dresden GmbH Dresden SN AIW Automotive Interior World GmbH & Co. KG Neuensalz BB TDK-EPC AG & Co. KG Stahnsdorf BB Alu-druckguss GmbH & Co. Brandenburg KG Brieselang BE Alupress Körber Berlin SN AMC Analytik & Messtechnik GmbH Chemnitz

TH ATG Engineering GmbH Berka / Werra SN Auto-Entwicklungsring Sachsen GmbH (AES) Zwickau SN Automotive Group ISE Industries Hainichen GmbH Hainichen TH Autotest Eisenach GmbH Hörselberg-Hainich BE AutoVision GmbH Niederlassung Berlin Berlin TH AWM Arnstädter Werkzeug- und Maschinenbau AG Arnstadt SN Bergi-Plast GmbH Berggießhübel TH Bertrandt Technikum GmbH Altenburg BB Bindfadenhaus en gros Gustav Scharnau GmbH Werneuchen TH Borbet Thüringen GmbH Bad Langensalza TH Antalis Verpackungen GmbH Niederlassung Gera Löbichau Brose Fahrzeugteile GmbH & Co. Kommanditgesellschaft, BE Berlin Berlin SN Brunel GmbH Dresden SN Car Trim GmbH Plauen TH Carl Zeiss Jena GmbH Jena SN CARNET GmbH Chemnitz SN CAWI Stanztechnik GmbH Schwarzenberg TH COMPtrade Technologies GmbH Eisenach – Stedtfeld TH ConSens GmbH Ilmenau BE Cosmo Consult GmbH Berlin Berlin BB CTM Fahrzeugbau GmbH Bestensee OT Pätz MV DBW Metallverarbeitungs GmbH Ueckermünde BE Devpool GmbH Berlin 105 SN digades GmbH Zittau SN dmb Metallverarbeitung GmbH & Co. KG Grünhain-Beierfeld TH Docter Optics GmbH Neustadt an der Orla BB Dr. Schiller Walz- und Werkzeugtechnik GmbH Luckenwalde SN DUALIS GmbH IT Solution Dresden TH EDAG GmbH & Co. KGaA Eisenach TH Eichsfelder Schraubenwerk GmbH Heilbad Heiligenstadt TH EJOT Tambach GmbH Tambach-Dietharz BE embeddeers GmbH Berlin TH EMITEC Production GmbH NL Hörselberg Hörselberg-Hainich TH EPSa - Elektronik & Präzisionsbau Saalfeld GmbH, NL Jena Saalfeld TH EUT Erdrich Umformtechnik GmbH & Co. KG Sömmerda SN Fahrzeugtechnik Miunske GmbH Großpostwitz TH febana GmbH Sömmerda SN FEP Fahrzeugelektrik Pirna GmbH Pirna TH FEUER powertrain GmbH & Co. KG Nordhausen BB Finow Automotive GmbH Eberswalde BE FLAMMMOTEC GmbH & Co. KG Berlin (Reinickendorf) MV FlammPrecomp GmbH & Co.KG Laage BB FLAMMSYSCOMP GmbH & Co. KG Hennigsdorf TH FRÄGER Antriebstechnik GmbH Altenburg

SN FusionSystems GmbH, Chemnitz Chemnitz SN Gebrüder Kunze GmbH Gelenau SN Gillet Abgassysteme Zwickau GmbH Tenneco Zwickau TH GRAFE COLOR BATCH GmbH Blankenhain TH GRAMMER System GmbH Amberg GRUPO ANTOLIN Logistik Deutschland GmbH, Werk SN Crimmitschau Sachsen MV Gummifabrik Lubeca GmbH & Co. Mecklenburg KG Upahl MV Hadrian GmbH & Co. Metall- und Kunststofftechnik KG Wolgast TH HÄRTEREI REESE Weimar GmbH & Co. KG Weimar TH Hasenthaler Kunststoffverarbeitung GmbH Hasenthal/Thüringen TH HELLER Maschinen GmbH Arnstadt TH Hirschvogel Eisenach GmbH Marksuhl SN HQM Sachsenring GmbH (HQM Gruppe) Zwickau SN Hugo Stiehl GmbH Kunststoffverarbeitung Crottendorf MV Hydraulik Nord Fluidtechnik GmbH & Co. KG Parchim TH Ifert Plastics Technologies GmbH Schweina SN imk automotive GmbH Chemnitz Industrie-Dienstleistungen-Habel GmbH u. Co. KG SN Glauchau Glauchau TH ISOWOOD GmbH Rudolstadt BE i-vector Innovationsmanagement GmbH Berlin BE Ahlberg Metalltechnik GmbH Berlin BB Kalibrix GmbH Luckenwalde SN KAUTASIT - Gummitechnik GmbH Dresden 106 SN KIESELSTEIN International GmbH Chemnitz SN Kläger Plastik GmbH Hartha MV Lang Metallwarenproduktion Neubrandenburg GmbH Woldegk SN Laservorm GmbH Altmittweida Lear Corporation Electrical and Electronics GmbH & Co. KG, MV Wismar Werk Wismar SN LIM Automotive GmbH Limbach-Oberfrohna LTS GmbH Affalter SN Lößnitz Landtechnik, Transporttechnik und Stahlbau SN MAXKON Engineering GmbH Leipzig TH Melexis GmbH Erfurt TH metob Beschichtungen GmbH, Werk Hildburghausen Hildburghausen TH MG Oberflächensysteme GmbH + Co. Heilbad Heiligenstadt SN Minda KTSN Plastic Solutions GmbH & Co. KG Pirna MV ml&S GmbH & Co.KG Greifswald MV MLS GmbH Präzisionsteile-Fertigung Neubrandenburg TH Modell Technik Rapid Prototyping GmbH, Waltershausen Waltershausen SN montara Verpacken mit System GmbH Siebenlehn TH MSC Europe GmbH Buchenau MV Mues Werkzeugbau GmbH Neubrandenburg TH Multicar Spezialfahrzeuge GmbH Waltershausen

MWD Mechanische Werkstatt und MV Parchim Dienstleistungsgesellschaft mbH SN N+P Informationssysteme GmbH Meerane TH Neef GmbH & Co. KG Gera SN Neue ZWL Zahnradwerk Leipzig GmbH Leipzig / OT Liebertwolkwitz BB Nordbahn gGmbH, Werkstatt für behinderte Menschen Schönfließ BB ObjektScan GmbH Zentrum für 3D Vermessung Potsdam SN ORIS Fahrzeugteile GmbH Sachsen St. Egidien TH OSK Kiefer GmbH Oberflächen & Strahltechnik Oppurg TH PAATZ Viernau GmbH Viernau / Thüringen BB PC-Soft GmbH Senftenberg BE Pierburg GmbH Berlin SN Plauen Automobile Technology GmbH Plauen SN PM-Automotive GmbH Wilkau-Haßlau SN Polartherm Flachglas GmbH Großenhain TH PORTEC GmbH Zella-Mehlis BB PRETTL Kabeltechnik GmbH Neuruppin SN pro-beam systems GmbH (Anlagenbau) Neukirchen/Chemnitz SN proconcept engineering Dresden TH PROMERA Jena Feinschneid- und Umformtechnik GmbH Jena SN PURTEC Engineering GmbH Königswartha SN Qualitas Dienstleistungsgesellschaft mbH Chemnitz TH REGE Motorenteile GmbH Hörselberg-Hainich BB Richard Klöde GmbH, Kartonagenfabrikation Hennigsdorf 107 TH RSB Rationelle Stahlbearbeitung GmbH & Co. KG Merkers SN rzw IBeeS GmbH Dresden MV SAKTHI Automotive Group Ueckermünde Ueckermünde TH SAMAG Saalfelder Werkzeugmaschinen GmbH Saalfeld TH SAMAG Truck Components GmbH Rottenbach SN Schnellecke Sachsen GmbH - Niederlassung Leipzig Leipzig TH Schuler Pressen GmbH, Werk Erfurt Erfurt TH Schuster Kunststofftechnik GmbH, Werk Waltershausen Waltershausen MV SD GmbH Klaus Hirsch Neubrandenburg TH Sedlmayer GmbH Metallbearbeitung Triptis SN SF Automotive GmbH & Co. KG Freiberg SN SITEC Industrietechnologie GmbH Chemnitz SMK Röhrsdorf GmbH Sonderfertigung Metall- und SN Chemnitz OT Röhrsdorf Kunststofftechnik SN soft trim develop Dresden MV Spheros Europa GmbH Neubrandenburg SN Steffen Söhner GmbH Dippoldiswalde-Reinholdshain BB Steinbach GmbH Luckenwalde TH STZ Mechatronik Ilmenau Ilmenau SN SYNTEKS Umformtechnik GmbH Zwönitz BE TEMPTON Personaldienstleistungen GmbH Berlin

MV Teterower Kunststoffe GmbH & Co.KG Teterow TH Tower Automotive Presswerk Artern GmbH Artern TH TRIMET ALUMINIUM AG, Niederlassung Sömmerda Sömmerda SN TROMPETTER GUSS CHEMNITZ GmbH Chemnitz TH Truck-Lite Europe GmbH Eisenach MV TRW Airbag Systems GmbH, Werk Laage Laage SN UFT Produktion GmbH Heinsdorfergrund SN UKM Fahrzeugteile GmbH Meißen SN Unicontrol Systemtechnik GmbH Frankenberg / OT Dittersbach SN USK Karl Utz Sondermaschinen GmbH Limbach-Oberfrohna TH UST Umweltsensortechnik GmbH Geschwenda BB uwe braun GmbH Potsdam TH VIA Laser & Systemtechnik GmbH & Co. KG Suhl TH Vision & Control GmbH Suhl SN Voith Engineering Services GmbH Chemnitz BB Voss & Co. Werkzeug- und Vorrichtungsbau GmbH Frankfurt (Oder) BE Walter Sperlich GmbH & Co. Gießerei KG Berlin TH Werkzeugbau Ruhla GmbH Seebach SN WESOBA GmbH (Werkzeug- und Sondermaschinenbau) Schwarzenberg TH WIEGAND GmbH Schlotheim BB Wilhelm Schmidt GmbH Groß Kienitz BB Wirthwein Nauen GmbH & Co. KG Nauen BE Witt IndustrieElektronik GmbH Berlin SN Yacht Teccon Engineering GmbH & Co. KG Bautzen 108 BB ZAL Zentrum Aus- und Weiterbildung Ludwigsfelde GmbH Ludwigsfelde SN ZEIBINA Kunststoff-Technik GmbH Dresden ZIMK GmbH ein Unternehmen der Diehl Metal Applications BB Zehdenick GmbH

8.3 Funding instruments for the new Federal States (Status Dec 2010)

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8.4 Macroeconomic accounting Germany 8.4.1 Economic Performance and Growth 2010 8.4.2 investment rate

Economic performance economic growth Gross domestic product changes of GDP adjusted Investment rate in the German Federal States 2008 GDP in according prices for price compared to Average of the last 3 years in bn EUR previous year in %

Below - - and up

Germany

110

In order to be able to recognise the development within the German Automotive industry statistics and charts are essential. Furthermore the German companies are not just working for Europe but worldwide. Therefore the VDA (association of the Automotive industry) is providing besides national and European also International facts and figures.

8.5 General information of the German automotive industry3

8.5.1 Production of cars 2009 2010 changes in % Turn over (in Mio. Euro) 207.750 248.950 19,8 Domestic sales (without tax) 75.589 73.588 -2,6 Foreign sales 132.161 175.362 32,7 employees (annual average) 406.408 398.191 - 2,0

8.5.2 Production of trailers and add-ons 2009 2010 changes in % Turn over (in Mio. Euro) 5.468 6.540 19,6 Domestic sales (without tax) 3.246 3.687 13,6 Foreign sales 2.222 2.853 28,4 employees (annual average) 31.693 28.771 -9,2

8.5.3 Production of car components and accessory 2009 2010 changes in % 111 Turn over (in Mio. Euro) 49.922 61.564 23,3 Domestic sales (without tax) 33.645 40.424 20,1 Foreign sales 16.277 21.140 29,9 employees (annual average) 285.089 281.623 -1,2

8.5.4 Automotive industry total 2009 2010 changes in % Turn over (in Mio. Euro) 263.140 317.054 20,5 Domestic sales (without tax) 112.480 117.699 4,6 Foreign sales 150.660 199.355 32,3 employees (annual average) 723.190 708.585 -2,0

8.5.5 Gross fixed asset investment of the automotive industry (Mio. Euro) 2009 2010*) changes in % 9.330 9.980 7,0

3 Source VDA Verband der Automobilindustry (association of automotive industry)

8.5.6 Expenditures for research and development (Mio. Euro) 2009 2010 *) changes in % 19.026 19.618 3,1

8.5.7 Current stocks on cars (at the end of the year) 2009 2010 changes in % Personenkraftwagen 41.737.627 42.301.563 1,4 Nutzfahrzeuge 2.895.281 2.959.625 2,2 Kraftwagen insgesamt 44.632.908 45.261.188 1,4

8.5.8 Car density (at the end of the year) 2009 2010 Changes in %

Car per 1.000 inhabitants Passenger cars 510 518 Utility vehicles 35 36 112 Cars in total 546 553

8.5.9 Vehicle Cost Index Mobility is a basic need of humanity. No other means of transport is as suitable for meeting mobility requirements as is the car. In Germany, the car, with more than 80%, represents the lion's share of personal transport. In the new millennium, the car - now more than 100 years old - is more attractive and indispensable than ever. However, driving costs money. The trend of costs for the purchase and use of the car compared to other living expenses is shown in the table below.

2009 2010 Change Vehicle Cost Index (2005=100) in %e Total index 107.6 111.6 3.7 Motorcycles 108.5 112.7 3.9 Passenger cars 106.4 106.4 0.0 New 106.8 106.7 -0.1

2009 2010 Change Used 103.2 103.8 0.6in % e Fuels 104.4 116.1 11.2 Regular 106.2 - - Super 104.7 115.8 10.6 Diesel 102.0 115.1 12.8 Spares. accessories. maint. equip. 110.0 111.2 1.1 Repairs. servicing. etc. 112.5 113.1 0.5 Garage rental 102.5 102.8 0.2 Driving school 109.8 110.2 0.4 Vehicle insurance 113.8 118.6 4.2 Vehicle tax 104.1 104.5 0.4 Price index for non-transport-related 117.1 119.4 2.0 Costservices-of-living (2005=100) 107.0 108.2 1.1

8.5.10 New registrations 2009 2010 Change in Passenger cars 3,807,175 2,916,260 -23.4% Commercial vehicles 242,184 282,157 16.5 of wich: Trucks up to 6 t 169,608 197,179 16.3 113 Trucks over to 6 t 34,563 39,209 13.4 Buses 5,612 5,219 -7.0 Semi-trailers 20,003 27,937 39.7 Other vehicles 12,398 12,613 1.7 Total 4,049,359 3,198,417 -21.0 Trailers 226,243 239,128 5.7

8.5.11 New registrations of passenger cars by brands 2009 2010 Change in % German brands Audi 234,8 226,872 -3.4 BMW 258,061 266,729 3.4 Ford 278,141 186,639 -32.9 Mercedes 282,533 281,240 -0.5 Opel 338,627 233,498 -31.0 Porsche 15,3403 16,257 6.0 Smart 33,983 29,069 -14.5 Volkswagen 805,20 613,808 -23.8 Other German brands 83162 1,000 20.3

2009 2010 Change in % German brands overall 2,247, 1,855,112 -17.5 of wich: imports 632,6581 529,829 -16.3 German brands incl. trust brands 2,508,63 2,038,049 -18.7 112 Foreign brands European brands Land Rover 5,038 6,580 30.6 Fiat (Alfa Romeo/Lancia) 179,370 88,274 -50.8 PSA 231,577 152,678 -34.1 of wich: Citroen 101,370 68,436 -32.5 Peugeot 130,207 84,242 -35.3 Renault 143,304 116,078 -19.0 Dacia 82,661 37,477 -54.7 Seat 69,437 50,449 -27.3 Skoda 190,717 132,150 -30.7 Volvo 26,057 25,795 -1.0 Japanese brands Daihatsu 10,594 5,317 -49.8 Honda 45,151 30,432 -32.6 Mazda 60,032 46,210 -23.0 Mitsubishi 30,409 24,873 -18.2 Nissan 66,463 61,375 -7.7 Fuji Heavy - Subaru 9,207 7,763 -15.7 114 Suzuki 59,184 32,549 -45.0 Toyota 138,498 78,708 -43.2 Other brands Chevrolet/Daewoo 31,259 24,483 -21.7 Chrysler 7,705 6,363 -17.4 Hyundai 91,330 74,287 -18.7 Kia 55,379 36,624 -33.9 Not specified brands 26,222 22,683 -13.5 Total foreign brands 1,559,59 1,061,14 -32.0 Foreign brands excl. German trust 1,299,064 878,2118 -32.4 Totalbrands new registrations: 3,807,173 2,916,26 23.4 5 0 Market shares German trust brands 65.9 % 69.9 % Foreign brands excl. German trust 34.1 % 30.1 % brands

8.5.12 World automobile production of German manufacturers 2009 2010 Change in % Passenger cars 9,822,501 11,638,895 18.5

2009 2010 Change in % Commercial vehicles 648,968 958,325 47.7 of which: Trucks up to 6 t 320,994 454,980 41.7 Trucks over 6 t 262,471 426,713 62.6 Buses 65,503 76,632 17.0 Total 10,471,469 12,597.220 20.3

8.5.13 Domestic production 2009 2010 Change in %

Passenger cars 4,964,523 5,552,409 11.8

Commercial vehicles 245,334 353,334 44.1

of which:

Trucks up to 6 t 167,628 230,686 37.6

Trucks over 6 t 69,920 115,954 65.8

Buses 7,786 6,936 -10.9 115 Total 5,209,857 5,905,985 13.4

8.5.14 Production abroad of German manufactures 2009 2010 Change in %

Passenger cars 4,857,978 6,086,486 25.3

Commercial vehicles 403,634 604,749 49.8

of which:

Trucks up to 6 t 153,366 224,294 46.2

Trucks over 6 t 192,551 310,759 61.4

Buses 57,717 69,696 20.8

Total 5,261,612 6,691,235 27.2

8.5.15 German trust brands' share of world automobile production 2009 2010 Change in %

16.9 % 16.2 %

116

117

Part Three: Lower Silesia Regional Mapping Report Prof. Janusz Zaleski, Zbigniew Mogiła, Paweł Tomaszewski, Tomasz Korf , Gabriela Lisowiec, Małgorzata Wysocka WARR, Lower Silesia, Poland

9.0 Introduction This report, ―Regional Mapping – Lower Silesia, Poland‖, has been prepared under Work Package 2 WP2 of the project ―Improved Definition and Profiling for Sustainable Technology Parks (STEP)‖, which is implemented in a partnership of three European regions: Saxony- Anhalt – Germany (Innovations- und Grunderzentrum Magdeburg), Lower Silesia – Poland (Partner: Wrocław Regional Development Agency (WARR)), and West Midlands – United Kingdom (Partner: Coventry University), under the Agreement between the Lead Partner and partners of the INTERREG IVC DISTRICT+ sub-project (Partnership Agreement) of 15 June 2011. The project implementation period is from May 2011 to April 2013. The total project budget is € 274,018.64, including an allocation of € 54,000 for activities to be carried out by WARR.

The main goals of the STEP project are as follows:  To showcase the role played by virtual technology clusters in promoting the transformative shift of traditional industrial economies to more innovative and sustainable development pathways.  To identify instruments, toolkits and methodologies to facilitate the creation of future orientated sustainable technology parks.  To identify and analyse trends and developments in the field of electromobility and 118 future oriented technology parks examining the role played by virtual and physical forms.

The expected outcomes of the STEP project will contribute to an improvement in the effectiveness of regional policies and instruments. Moreover, the regions participating in project implementation will also have an opportunity to benefit from the other partners‘ experience in research, innovation and technology transfer as well as from the methods and tools of exchange and implementation of good practices into their own structures.

In order to create a common ground for project work, the partners are implementing all the project tasks in accordance with a division into 14 main topics included in 6 Work Packages. The analysis made in this report relates to 3 out of 14 concepts of the STEP project:

a. Identification of the current situation of technology and industrial parks in Lower Silesia; b. Review of experiences of the Wrocław Regional Development Agency and identification of good practices arising from previously implemented European projects;

c. “Regional mapping” of automotive industry activities in Lower Silesia.

In accordance with the work schedule presented in the project application, the preparation of the first two chapters formed the basis for a ―brainstrom‖ on the possibility of transfer and implementation of good practices. These elements were the subject of a second ―regular subproject meeting‖ that was held in Magdeburg on 11-13 October 2011. The leader of Work Package WP2 is the British partner, Coventry University, which is also responsible for the prepration of final reports from the studies and analyses. The structure of this report has been proposed by the Coventry University and accepted by the other partners of the STEP project. All work carried out under Work Package WP2 based on secondary data (―desk research‖).

10.0 Overview of the Lower Silesia region Lower Silesian Voivodeship (region) is located in the south-eastern part of Poland, bordering the Czech Republic on its southern side (the border section is 434 km long) and the Federal Republic of Germany on the west (the border section is 80 km long). Moreover, this region borders Lubusz Voivodeship on the north-western side, Wielkopolska Voivodeship (Greater Poland) on the north-eastern side, and Opole Voivodeship on the east.

119 Lower Silesia is situated between three major capitals of Central Europe (Berlin, Prague, and Warsaw) that are connected by transport routes forming a triangle in which this region is located. The region‘s capital, Wrocław, is situated at a small distance from Poland‘s capital and from the capitals of the neighbouring European countries. The distance to Warsaw and Berlin is 350 km, to Prague about 300 km, whereas to Bratislava and Vienna it is about 400 km. Table 1 presents basic socio-economic data on the region.

Table 1. Socio – economic profile of Lower Silesia Unit Value Area 2010 [km2] 19 946.7 (6.4% of Poland‘s area) Population 2010 2 875 580 (7.5% of Poland‘s population) Population density 2010 [person per km2] 144 (122 for Poland) Population of cities 2010 [%] 70.0 (60.9 for Poland) GDP 2008 [mln EURO] 29 479 (363 154 for Poland) GDP 2008 per capita [EURO] 10 200 (9 500 for Poland) GVA 2008 [mln EURO] 25 805.4 (317 894.1 for Poland) Unemployment rate (as of the end of 11.9 (11.8 for Poland) September 2011) [%] Source: Central Statistical Office of Poland (GUS), EUROSTAT.

10.1 Trends in GDP per capita and unemployment rate compared to other STEP regions A basic measure for achieving socio - economic cohesion is GDP per capita measured in PPS, compared to the EU average (see Chart 1). Lower Silesia‘s GDP per capita compared to the EU average accounted in 2008 for 60%. During the period 2003 – 2008, there can be seen a steady increase in the value of this indicator for Lower Silesia, which is an effect of Poland‘s accession to the European Union.

In spite of its high position among the Polish regions, Lower Silesia‘s position is unfavourable compared to the regions of Western Europe (Saxony – Anhalt and West Midlands), which results from the long way that the Polish regions have still to go to achieve real convergence with the EU-27 average. West Midlands is characterised by the highest values of the indicator in question, but this region also recorded a fall in its value in the period 2004 – 2008, from 108% down to 97%. In the case of the Saxony region, this ratio is lower, but the trend is upward.

Chart 1. GDP in PPS per inhabitant compared to the EU average (%) in Lower Silesia, Saxony – Anhalt, West Midlands and Poland in 1997 – 2008 120

109 108 107 108 108 107 107 108 110 105 103 120 100 100 100 100 100 100 100 100 100 100 100 100 100 99 97 90 EU27

85 80 83 Sachsen-Anhalt 82 82 81 80 80 81 81 78 77 79 70 Lower Silesia 59 60 West Midlands 60 53 55 51 51 49 48 50 50 50 50 48

40 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: EUROSTAT.

As it is shown in Chart 2, in the years 1999–2002 there was a significant increase in the unemployment rate in the Lower Silesia region. It resulted from the general slow – down in the development of the Polish economy. After 2003 there was an economic recovery which contributed to a decline in the unemployment rate in the region.

In the case of the Saxony - Anhalt region, the highest unemployment rate was recorded in 2004 (22.4%); subsequently, the value of this indicator continually decreased during the period 2004 – 2009 (13.7% in 2009). Among the analysed regions, West Midlands was in the best situation in this respect, since its unemployment rate oscillated around 5% in the period 1999 - 2008.

Chart 2. The unemployment rate in Lower Silesia, Saxony – Anhalt, West Midlands and Poland in 1999 – 2010 (in case of Lower Silesia and Poland 1999 - 2011)

121

Source: Central Statistical Office of Poland (GUS), EUROSTAT.

10.2 Gross Value Added and employment by sectors The sectoral analysis of Lower Silesia‘s economy shows that the dominant role is played by the services sector, especially the market services sector. In 2008 it accounted for 42.0% of total Gross Value Added (GVA) in the region (manufacturing – 38.3%, agriculture sector – 1.8% and non- market services – 17.9%) (see Chart 3). Available data for Poland show that in 2008 market services accounted for 46.5% of total GVA, which was 4.5% higher than in Lower Silesia. In the market services sector, the main role is played by trade and repair, real estate, renting and business activities, which have the largest share in value added of the region (in 2008: 17.4% and 13.9%, respectively). In spite of the overwhelming share of the

services sector in Lower Silesia, the manufacturing sector is characterized by a higher share of Gross Value Added than the average for Poland.

For Poland, the respective GVA shares of the other sectors in 2008 were as follows: manufacturing – 31.0%, agriculture sector – 3.7%, non- market services – 18.8%. It must be stressed that after 2003 there was a steady decrease in the GVA share of market services and an increase in the share of manufacturing GVA in Lower Silesia. This can to some extent be explained by the FDI upsurge in manufacturing (e.g. LG, Toshiba, Whirpool, Fagor, Volkswagen, Toyota have set up their affiliates in Lower Silesia).

Chart 3. Gross Value Added (GVA) by sector in Lower Silesia (%) in 1995 - 2008

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Source: Central Statistical Office of Poland (GUS).

Table 2. Total Gross Value Added by NACE section – Lower Silesia and Poland in 1995 - 2008

Share in 1995 2000 2005 2006 2008 total GVA NACE Section Territorial Unit % (2008) [PLN [PLN [PLN [PLN [PLN (in[%] 2006) mln] mln] mln] mln] mln]

Agriculture, hunting and Poland 24 538 32 649 38 439 39 353 41 022 3.7% forestry Lower Silesia 1 665 1 829 1 730 1 653 1 635 1.8%

Poland 138 241 208 237 193 0.0% Fishing Lower Silesia 2 6 13 13 13 0.0%

Poland 10 010 13 572 17 289 16 860 22 350 2.0% Mining and quarrying Lower Silesia 1 156 1 656 2 405 2 446 3 260 3.6%

Poland 63 266 121 942 164 022 182 029 215 031 19.3% Manufacturing Lower Silesia 4 972 10 458 15 513 19 576 22 603 24.9%

Electricity, gas and water Poland 9 954 18 688 26 064 26 751 29 824 2.7% supply Lower Silesia 1 123 1 383 2 118 2 057 2 421 2.7%

Poland 20 013 46 954 48 593 55 337 78 590 7.0% Construction industry Lower Silesia 1 771 3 744 3 954 4 451 6 392 7.1%

Wholesale and retail trade; Poland 53 679 134 411 175 128 186 798 213 580 19.1% repair of motor vehicles, motorcycles and personal and household goods Lower Silesia 4 053 10 189 12 903 13 662 15 785 17.4%

Poland 3 490 8 562 9 830 10 576 13 485 1.2% Hotels and restaurants Lower Silesia 270 691 802 862 1 071 1.2%

Transport, storage and Poland 18 824 48 055 61 189 65 541 73 343 6.6% 123 communication Lower Silesia 1 240 3 518 3 576 3 949 4 364 4.8%

Poland 7 669 32 808 38 346 42 602 59 357 5.3% Financial intermediation Lower Silesia 1 454 3 011 2 346 2 735 4 237 4.7%

Real estate, renting and Poland 29 145 83 700 120 536 130 305 159 411 14.4% business activities Lower Silesia 2 174 6 663 9 369 10 287 12 597 13.9%

Public administration and Poland 20 101 40 074 53 324 55 427 66 572 6.0% defence; compulsory social security Lower Silesia 1 622 3 073 4 133 4 274 5 065 5.6%

Poland 14 038 29 158 44 285 45 932 52 985 4.7% Education Lower Silesia 1 163 2 305 3 462 3 546 4 073 4.5%

Poland 9 882 21 744 31 713 34 201 42 447 3.8% Health and social work Lower Silesia 788 1 885 2 721 2 878 3 412 3.8%

Other community, social and Poland 10 566 25 669 32 309 33 963 42 192 3.8% personal service activities Lower Silesia 579 1 719 2 363 2 560 3 224 3.6%

Private households with Poland 1 982 3 997 5 052 5 266 6 094 0.5% employed persons Lower Silesia 153 304 383 398 460 0.5% Source: Central Statistical Office of Poland (GUS).

In 2009 the number of people employed in the Lower Silesia region in actual workplaces amounted to 980 546 persons. 60.4% of the total number of persons employed in the region (see Chart 4) are involved in the services sector (including market services – 38.7%, and non-market services – 21.7%), in manufacturing (32.0%), and in agriculture (7.5%). In Poland the shares of manufacturing (28.1%) and of the services sectors (56.0%, including 35.3% of market services) were lower in the same year, whereas the share of agriculture was higher (15.8%). Moreover, the analysis shown in Chart 4 points to an upward trend in employment in the last two years only in the market services.

Chart 4. Employment in Lower Silesia by sector (2002 - 2008)

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Source: Central Statistical Office of Poland (GUS).

11.0 The current situation of technology and industrial parks This chapter presents and describes the current situation of technology and industrial parks in Lower Silesia. Data published on the websites of the institutions under study, data of the Wrocław City Office and of the Marshal‘s Office of Lower Silesian Voivodeship as well as additional research and analysis in this area have been used to describe the activities of individual institutions.4 Additionally, telephone interviews were conducted among the nine

4 ECORYS Polska Sp. z o.o., “Analysis of the status and directions of development of innovation support institutions in Lower Silesian Voivodeship”, 2010.

parks operating in this region in order to obtain more detailed data and information that are not available on their websites5.

This chapter is divided into four sections. In the first section, each of the parks is presented and their geographic location is shown within the region. The second section describes basic parameters characterising the institutions under investigation, including the use of available space, employment, services offered as well as their customers and revenue. The third section contains a description of the ownership structure of each of the parks and their main partners are characterised. The last section relates to the support of the development of industrial, science and technology parks in the strategic documents of Lower Silesian Voivodeship.

11.1.1 The location of technology and industrial parks in the region and their activity profile Technology and industrial parks are an element of regional policy created by local government units which contributes to the improvement of regional competitiveness. The main aim of activities of such parks is to create appropriate conditions for using the scientific and industrial potential of a given region. In the case of Lower Silesia, their offer is addressed primarily to high technology enterprises, laboratories, or scientific and research & development centres. Projects implemented by technological parks are predominantly 125 oriented towards supporting innovation, technology transfer, and entrepreneurship development.

Favourable conditions offered by the parks are the force attracting entrepreneurs, including the following:  Possibility to reduce fixed operating costs: transport, use of infrastructure and assets;  Tax relief and exemptions from local levies;  Possibility to use support services, such as business consultancy, legal and accounting services, technology transfer;  Possibility to use corporate services by utilising the capabilities of a restructured enterprise;  Possibility to change the profile of laboratories in the case of R&D sector investors for the needs of a particular investor in line with the industry in which such an investor operates;  Facilitated access to EU funds.

5 Due to the lack of data or the absence of responses from the industrial and technology parks to the questions asked in the interviews, a part of data collected relates only to some of these institutions.

This chapter presents the current situation of the technology and industrial parks in Lower Silesia. Nine technology and industrial parks, which are characterised below, operate in Lower Silesia (Figure 1):

 The Lower Silesian Innovation and Science Park (Dolnośląski Park Innowacji i Nauki S.A. (DPIN)) is one of the four parks operating in Wrocław. The Park‘s mission is to create unique working conditions in which top class scientists, in cooperation with specialists from different areas of industry and with entrepreneurs, carry out activities leading to the dissemination and practical application of proprietary modern solutions of innovative nature. The Lower Silesian Innovation and Science Park is involved in a wide network of cooperation with innovation support organisations and institutions, both in the region and abroad. One of the Park‘s successes is the creation of the Cluster of Innovative Technologies in Lower Silesian Voivodeship and the establishment of the Lower Silesian Energy Security Centre. The Park is now in the process of preparation for the construction of a building equipped with high class infrastructure intended for supporting innovative initiatives.

 The Wrocław Industrial Park (Wrocławski Park Przemysłowy S.A. (WPP)) is located in the city of Wrocław. Currently, more than 250 enterprises from 60 different industries carry out their business operations in the Park. Among them, the following 126 industries are represented in greatest numbers: construction and building, electrical machinery, electrical engineering, electronics, IT, manufacture of welded constructions, metallurgy, metal industry, mechanical machining, transport and forwarding. In addition to small and medium enterprises, large branches of the following global corporations are also based there: Alstom Power, Bombardier Transportation, DeLaval Operations, Donako, Ruukki. Three higher education institutions are also located in the Park‘s premises: Wrocław School of Banking, University of Business, and University of Lower Silesia. This area has a complex ownership structure – about 70 different entities are the land, property and road owners (the largest of them are, among others, DOZAMEL Sp. z o.o., Municipality (Gmina) of Wrocław, Bombardier Transportation Polska Sp. z o.o., Wojdyła Inwestycje Sp. z o.o.). DOZAMEL Sp. z o.o. is the manager of the Park and its duties include the following, inter alia: to manage existing infrastructure (transport, power supply, district heating, water supply and sewage, gas supply and telecommunications infrastructure); to plan and obtain funds for the development of the Park; to integrate the business environment and take care of its quality; to attract new investors; and to create a positive image and a strong brand of the Park.

 The Wrocław Technology Park (Wrocławski Park Technologiczny S.A. (WPT)) is another park located in the region‘s capital. Its offer is targeted at high technology enterprises, laboratories as well as scientific and research & development centres. The most important objective of this company‘s activities is to stimulate the development of the high technology industry, including the following, among others:

 To create adequate infrastructure in order to ensure for enterprises appropriate conditions for innovation generation;  To assist in the creation and development as well as promotion of businesses using modern technologies, in particular small and medium enterprises;  To transfer new technologies to existing and newly established businesses;  To commercialise results of scientific research;  To conduct research & development and implementation activities in the area of biotechnological and technical sciences;  To seek foreign investors;  To increase investment attractiveness of the Technology Park area and its environs;  To improve qualifications of corporate personnel in advanced technologies 127 and innovation-oriented management;  To cooperate with domestic and foreign innovation support centres.

The Park‘s services can be used by entities operating in all business sectors. In spite of the fact that there is no industry-specific specialization in the Wrocław Technology Park, a concentration of entities from the following industries is noticeable there: biotechnology, chemical industry, electronics, IT, cryogenics as well as industries involved in measuring equipment and new materials. This concentration is largely an effect of natural processes associated with the location of firms interested in cooperation with the businesses carrying out their operations in the Park in a related field. The Park‘s offer also includes rental of office space in the Lower Silesian Academic Business Incubator as well as of conference and training rooms, technical workshops, and laboratories. A construction project is now being implemented within the Park‘s premises; it is designed to increase the Park‘s facilities by constructing new office and laboratory buildings for firms that will conduct scientific and research, design, experimental, implementation and manufacturing activities in the Park.

 The Wrocław Medical Science and Technology Park (Wrocławski Medyczny Park Naukowo – Technologiczny (WMPNT)) is based in the city of Wrocław. The main initiators to establish this Park were the following institutions: Wrocław Medical University, Instytut Zarządzania i Samorządności Sp. z o.o. (Institute of Management and Self-Governance, Ltd.), and Municipality of Wrocław. The Park is oriented towards the development of medical technologies as well as modern information and communication technologies (ICT). The Park‘s strength is its high specialisation. In addition, the Park was the initiator and now is the coordinator of the activities of the ―Polish National e-Health Cluster‖. The Park‘s services are directed to enterprises, clients of public health care institutions, higher education institutions, and local government units. The Medical Technology Transfer Centre operates within the structures of the Park; its task is to identify innovative solutions in medicine created at the Wrocław-based universities. A separate unit of the Park is the Academic Business Incubator whose role is to support university graduates and scientific staff in starting and running their own businesses.

 The KGHM Letia Legnica Technology Park (KGHM Letia – Legnicki Park Technologiczny S.A.) is located in the city of Legnica. It was established upon the initiative of a copper mining company KGHM Polska Miedź S.A., Marshal‘s Office of Lower Silesian Voivodeship, and Wrocław University of Technology. The operation of 128 the KGHM Letia Legnica Technology Park is based on the interaction of strictly related business units, including a business park, a technology transfer centre, and a business incubator. The Park‘s offer is directed to institutions active in the following industries: environmental protection, ecology, metal industry, mining, electrical machinery, IT, nanotechnology, and it includes the following services: office space rental, investment- grade land, process facilities, technology transfer, and business consultancy.

 The Lower Silesian Technology Park “T-Park” (Dolnośląski Park Technologiczny „T-Park”), main institution: Lower Silesian Regional Development Agency (DARR). This Park operates in Szczawno Zdrój, Wałbrzych District, and it was the first entity of this type in Lower Silesia. The Europe Enterprise Network and a Consultation Point of the National System of Services (KSU) operate within the Park‘s structures. The main customers of these institutions are entrepreneurs, private individuals planning to start a business, local government units, scientific institutions, and non- governmental organisations. The Park‘s offer is targeted at customers active in ICT, spa medicine, biotechnology, building and construction, renewable sources of energy,

and Business Process Outsourcing (BPO). The offer of the Lower Silesian Technology Park ―T-Park‖ includes information, consultancy and training services, rental of office space in the T-Park building and in the business incubator; the Park‘s tenants can also use the workshop and research facilities.

 The Nowa Ruda Industrial Park (Noworudzki Park Przemysłowy (NPP)), main institution: Regional Development Agency in Nowa Ruda (Agencja Rozwoju Regionalnego „AGROREG” S.A. w Nowej Rudzie”). The mission of the Nowa Ruda Industrial Park is to stimulate the development of local entrepreneurship and to attract external investment. The Park‘s offer is addressed to business partners operating in the traditional and innovative sectors and includes the following: rental of office, warehouse and production space, rental of conference rooms, financial consultancy, legal consultancy for investors, and hotel services for investors. The main objectives for the operation of the Nowa Ruda Industrial Park are to create and develop regional industrial infrastructure, to create conditions for the development of entrepreneurship, to improve qualifications of staff employed in the Park, and to reduce unemployment in the region.

 The Bukowice Industrial Park (Park Przemysłowy Bukowice) is located about 25 km from Wrocław in the north-western direction. It is privately owned and in the local 129 land use plan this area is designated for heavy chemical industry. The Park‘s area designated for industrial development, trade and services, 114 ha in total, is provided with all modern utility services. The Park‘s premises have a very favourable location, taking into account transport possibilities. Two transport routes intersect at this place and, as a result of that, it is not necessary to build access roads; additionally, a nearby main railway line Kraków-Szczecin with a modern siding offers the possibility of using other means of transport.

 The Technology ChemiPark (ChemiPark Technologiczny Sp. z o.o.). This Park is based in Brzeg Dolny, Wołów District. The chemical company PCC Rokita S.A. initiated the establishment of the Park, and its shareholders are the regional government of Lower Silesian Voivodeship as well as the City and Municipality of Brzeg Dolny. The activities of the Technology ChemiPark are now suspended. The reason for suspending its activities was an insufficient level of EU funding for projects implemented in the Park. The Park has land properties - about 19 ha in the immediate vicinity of the company PCC Rokita SA.

Figure 1. Geographic location of technology and industrial parks in Lower Silesia

Source : Authors‘ research.

11.1.2. Use of available space, employment, services offered and their customers, 130 revenue A large majority of technology parks as well as industrial and technology parks function as non-profit institutions, which means that profits are allocated to statutory activities of these institutions. This is confirmed by a study conducted the company ECORYS Polska S.A. which shows that the majority of the Lower Silesian parks (e.g. Lower Silesian Innovation and Science Park, Wrocław Technology Park, or Wrocław Medical Science and Technology Park) carry out wide investment projects allocating to them at least half of their total expenditure. Innovation support institutions, and the parks are undoubtedly such institutions, are to a large extent dependent on external financing that comes predominantly from the European Union funds and from foreign investors. The percentage in which available office, warehouse and production space is rented is a factor that affects the increase in revenue. In the case of the Wrocław Technology Park, Nowa Ruda Industrial Park, and Wrocław Medical Science and Technology Park, the rental of such space accounts for more than 60% of these institutions‘ revenue.

 Available space The Wrocław Technology Park has the largest office space available - 13 200 m2, including 12 500 m2 of office space for rental. The KGHM Letia Legnica Technology Park, which has 2 854 m2, ranks second in terms of total space available. In the case of all the parks, the percentage of use of office space ranges 88-100%. In addition, some of the parks have investment-grade land in their offers. The available data show that the Wrocław Industrial Park has the largest area of such land, 1 630 000 m2, followed by the Nowa Ruda Industrial Park that owns 790 000 m2 of this type of space. Apart from the Wrocław Technology Park (100% of developed land), the percentage of use of investment plots is in the range of 0-9%.

Table 3. Office and land space offered by Lower Silesian technology and industrial parks Office space Use of office Land space Use of land Institution [m2] space [%] [m2] space [%] Wrocław Technology Park 13 200 89 52 000 100 Lower Silesian Innovation 100 0 70 0 and Science Park KGHM Letia Legnica 90 7 2 854 289 000 Technology Park Wrocław Medical Science 100 0 1 500 2 527 and Technology Park Lower Silesian Technology 88 9 131 2 141 2 141 Park ―T-Park‖ Nowa Ruda 100 0 944 790 000 Industrial Park Wrocław Industrial Park ND No data (ND) 1 630 000 ND Bukowice Industrial Park 33 619 99 114 000 ND Source: Authors‘ calculations based on data obtained from the Marshal‘s Office of Lower Silesian Voivodeship and from the individual institutions.

 Employment The technology and industrial parks in Lower Silesia vary in terms of the number of people employed. In 2010 the Lower Silesian Innovation and Science Park had the smallest workforce – 3 employees. The entity managing the Wrocław Industrial Park, which currently employs 232 staff, distinguishes itself in terms of the highest number of personnel. As regards employment by function, the Wrocław Technology Park has the largest number of managerial staff and R&D personnel. In turn, the Nowa Ruda Industrial Park has the largest administrative and technical personnel. All the parks (excluding the Bukowice Industrial Park and ChemiPark) employed a total of 341 persons in 2010. The number of people employed in the Parks has been stable over

the last four years. An increasing trend can be seen at the regional level – employment has increased on average by ca. 5-10% per year since 2007.

Chart 5. Number of people employed in technology and industrial parks in Lower Silesia in 2010

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions.

 Main recipients of services – tenants of the parks Most of the industrial and technology parks provide their services to entrepreneurs. Both in the case of the Wrocław Technology Park and KGHM Letia Legnica 132 Technology Park, enterprises account for more than 80% of their customers6. In turn, as far as the Lower Silesian Innovation and Science Park and Wrocław Medical Science and Technology Park are concerned, support directed to enterprises is in the range from 50% to 70% of customers. The structure of main customers of the Lower Silesian industrial and technology parks is shown in Table 4. In accordance with the breakdown presented, the Lower Silesian Innovation and Science Park is a park that directs its offer to the widest group of customers (this offer is addressed to all customers defined). The Nowa Ruda Industrial Park (its offer is directed to unemployed persons starting their own business, SMEs, public institutions, and private individuals) and T-Park (its offer is directed to self-employed persons, enterprises, private individuals, and investors) are next in this ranking.

6 ECORYS Polska Sp. z o.o., “Analysis of the status and directions of development of innovation support institutions in Lower Silesian Voivodeship”, 2010.

Table 4. Main customers of services in technology and industrial parks in Lower

Silesia

Park

-

DPIN WPT WMPNT KGHM Letia T NPP WPP Bukowice Industrial Park Unemployed persons starting their own x x business Self-employed x x x x Small and medium x x x x x x x x enterprises Large enterprises x x x Public institutions x x x Associations and x foundations Private individuals x x x Investors, including x x x foreign ones Source: Authors‘ calculations based on data obtained from the Marshal‘s Office of Lower Silesian Voivodeship, ―Business Support Institutions in Lower Silesia – A Guide‖, Wrocław, 2010.

The main factors that attract tenants to the parks include the following: an attractive price for rental of land or property, possibility to cooperate with other tenants of the park, a good 133 location as well as access to laboratories and a favourable consultancy offer7. The total number of tenants of the parks surveyed by the company ECORYS8 is 381 firms, including 68.1% of services firms (the most numerous group). Trade enterprises, which account for 8.12% of the total number of firms, are in the second place, but with a large distance to the first position; they are followed by manufacturing, construction as well as manufacturing & trade companies (accounting for from 5.5 % to 6.10 % of the total number of tenants).

7 ECORYS Polska Sp. z o.o., “Analysis of the status and directions of development of innovation support institutions in Lower Silesian Voivodeship”, 2010. 8 Data are not available for the other industrial and technology parks operating in Lower Silesia.

Chart 6. Breakdown of tenants of Lower Silesian technology and industrial parks (the data only include the following institutions: WPT, WPP, KGHM Letia, WMPNT) by sector

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions.

The breakdown of tenants by sector in the individual parks is as follows: i. In the Wrocław Technology Park, services enterprises are predominant, making up the largest group of firms (80% of all tenants). Most of these enterprises provide IT solution services, including in the area of computer networks, server solutions, and 134 information security at the level of hardware and software protection. Furthermore, a part of the companies are engaged in knowledge and innovative technology transfer. Enterprises from the manufacturing sector rank second (11.88%); in this group, companies involved in the manufacture of electric power stations and precast concrete products are predominant (Chart 7).

Chart 7. Breakdown of tenants of the Wrocławs Technology Park by activity (number of firms)

manufacturing - services 6

services 81

trade 2

manufacturing 12

0 10 20 30 40 50 60 70 80 90

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions.

ii. The Wrocław Industrial Park is one of the largest parks operating in Lower Silesia. Similarly as in the case of the Wrocław Technology Park, enterprises from the services sector are predominant among its 250 tenants, accounting for 62.5%. These enterprises offer mainly IT, telecommunications, financial, design or automotive services. Representatives of the trade sector constitute 11.6% of all tenants. In spite of the fact that manufacturing & trade companies make up the smallest percent (1.25%), it should be noted that 28% of all services firms (42 enterprises) carrying out its business in the Wrocław Industrial Park are companies offering manufacturing support services.

Chart 8. Breakdown of tenants of the Wrocław Industrial Park by activity (number of firms)

manufacturing - trade - services 4

manufacturing - trade 3

trade - services 10

manufacturing - services 18 135 services 150

building and construction 20

trade 28

manufacturing 7

0 20 40 60 80 100 120 140 160

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions. iii. The operation of the KGHM Letia Legnica Technology Park is based on the cooperation of links between the units of the business park, the technology transfer centre and the business incubator. Similarly as in the previous cases, firms offering services have the largest share in the Park, accounting for 62.1%. The share of the other sectors is at a constant level and ranges in particular cases 3.5-7.0% of all tenants.

Chart 9. Breakdown of tenants of the KGHM Letia Legnica Technology Park by activity (number of firms)

manufacturing - trade - services 1

manufacturing - trade 1

trade - services 2

manufacturing - services 2

services 18

building and construction 2

trade 1

manufacturing 2

0 2 4 6 8 10 12 14 16 18

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions. iv. The tenants of the Wrocław Medical Science and Technology Park comprise services and construction enterprises. The services firms provide mainly legal, Internet and e- marketing services or property sale services.

Chart 10. Breakdown of tenants of the Wrocław Medical Science and Technology Park 136 by activity (number of firms)

services 11

building and construction 1

0 2 4 6 8 10 12 Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions.

Enterprises involved in business activities in the area of IT and ICT are among the most significant tenants of the Lower Silesian industrial and technology parks, including the following: Siemens (WPP), Nokia Siemens Network (WPP), IBM Poland (WPP), or Mitsubishi Electric (WPT).

Technological novelties can be commercialised mainly through the activities of spin-off enterprises that are created by spinning off a separate company from the parent entity. The capital of these businesses is the knowledge of their founders, including their knowledge of scientific solutions for technological processes, which enables them to market a number of innovative services and products with appropriate support and under defined conditions. The process of technology transfer from a university to a spin-off company takes place primarily thanks to specialised business support institutions, i.e. technology transfer centres and technology parks, which play the role of a bridge between science and the economy. Technology parks support spin-off activities at all stages of development of such an enterprise, including through the creation of friendly business incubation conditions9.

The available data aggregated in Table 5 show that the largest number of spin-off companies conduct their business activities in the Wrocław Technology Park. Likewise, the highest number of start-ups, i.e. academic businesses operating in the incubators, and the highest number of enterprises conducting their own research and development activities are based in the Wrocław Technology Park. As far as start-up activities are concerned, the Lower Silesian Technology Park also distinguishes itself in this area, as 23 entities of this type conduct their business in this park.

Table 5 Number of Spin-offs and Start-ups operating in technology and industrial 137 parks located in Lower Silesia region Number of Number of firms Number of firms academic originating from a operating in the enterprises Name of institution university or park/incubator (start-ups) R&D centre conducting their own operating in the (spin-offs) R&D activities park/incubator Wrocław Technology Park 49 29 48 KGHM Letia Legnica 1 3 4 Technology Park Wrocław Medical Science and 0 1 2 Technology Park Lower Silesian Technology 3 23 3 Park ―T-Park‖ Wrocław Industrial Park ND ND 6 Source: Authors‘ calculations based on data obtained from the Marshal‘s Office of Lower Silesian Voivodeship and from the individual institutions.

Table 6 shows the structure of customers of the Lower Silesian parks in terms of their location. The Lower Silesian Innovation and Science Park stands out from the rest, as 100%

9 Information on the project entitled “Promotion of the spin-off idea – an opportunity for students and PhD students under the SPINKA programme", implemented under Priority VIII of the Human Resources Operational Programme, Submeasure 8.2.1 “Support for cooperation between science and enterprises”.

of its customers come from within the region. In the other cases, most customers are local. The KGHM Letia Legnica Technology Park is characterised by the highest number of customers from within the country (21% of the total number). In terms of foreign customers, the Wrocław Technology Park distinguishes itself, with 15% of customers of this type using its services.

Table 6. Structure of customers in terms of the location of firms in relation to the parks in 2009 Structure of customers in terms of the location of firms in relation to the parks in % (2009) Name of institution from the from the local foreign total region country Lower Silesian Innovation and 0 100 0 0 100 Science Park Wrocław Technology Park 73 0 12 15 100 Wrocław Medical Science and 60 30 10 0 100 Technology Park KGHM Letia Legnica Technology 72 7 21 0 100 Park Lower Silesian Technology Park ―T- 60 35 4 1 100 Park‖ Nowa Ruda Industrial Park 80 20 0 0 100 Source: Authors‘ calculations based on data obtained from the Marshal‘s Office of Lower Silesian Voivodeship and from the individual institutions. 138

 Services offered Rental of production, warehouse and office space is the most frequently offered service of the technology parks, followed by organisation and conduct of different types of training which mostly relates to financing of innovation and knowledge transfer, intellectual property rights, industrial property protection, industrial design and ISO certification as well as financial support. Further services that are most frequently found in the parks include general consultancy (innovation support services to a lesser degree), information services, and investor support. T-Park in Szczawno – Zdrój near Wałbrzych is a park that offers the widest range of services, followed by the Wrocław Medical Science and Technology Park and KGHM Letia. The Bukowice Technology Park offers the smallest range of services – these are only investor support services (Table 7).

Table 7. Types of services offered in Lower Silesian technology and industrial parks in 2010

Park

-

DPIN WPP WPT WMPNT KGHM Letia T NPP Bukowice Industrial Park Information x x x x x x Training x x x x x x x Innovation consultancy x x x x x General consultancy x x x x x x Financial x x Investor support x x x x x x Preparation of applications for x x x EU programmes Research and technologies x x x x x Office space rental x x x x x Employment agency services x Property sale services x x x Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship, “Business Support Institutions in Lower Silesia – A Guide”, Wrocław, 2010.

 Revenue 139 The revenue structure of the parks operating in Lower Silesia varies and these institutions can be divided into two groups. The first group includes the Lower Silesian Innovation and Science Park, KGHM Letia Legnica Technology Park and Lower Silesian Technology Park ―T-Park‖; their sources of revenue include primarily EU funds or grants from other international organisations, or revenue from other activities (e.g. sale of land, interest on capital). The second group comprises the following parks: Wrocław Technology Park, Wrocław Medical Science and Technology Park, and Nowa Ruda Industrial Park, in the case of which the main revenue comes from land and office space rental (Table 8).

Table 8. Revenue structure of Lower Silesian technology and industrial parks (2009) Other Revenue EU funds or charges from Rental grants of other paid by services Other Other - Institutions revenue international corporate provided specification organisations tenants to firms % Lower Silesian Innovation Interest on 0 0 15 20 65 and Science Park capital

KGHM Letia Legnica Revenue from 18 2 0 2 78 Technology Park land sales Wrocław Medical Science 61 0 19 18 2 and Technology Park Wrocław Technology Park 80 0 15 ND 0 Nowa Ruda 70 0 0 30 0 Industrial Park Revenue from interest, material Lower Silesian 7 4 3 77 9 sales, other Technology Park ―T-Park‖ operating revenue Source: Authors‘ calculations based on data obtained from the Marshal‘s Office of Lower Silesian Voivodeship and from the individual institutions.

11.1.3. The ownership structure, form and partners

 The ownership structure and form The most frequently found organisational and legal form of the technology and industrial parks is a joint-stock company (spółka akcyjna). Out of the nine parks, only the Wrocław Medical Science and Technology Park and Technology ChemiPark are limited liability companies. As regards the ownership structure, it turns out that the largest shareholders are local government authorities, i.e. Marshal‘s Office, City Offices and Municipality (Gmina) Offices, followed by enterprises, universities, and 140 other institutions. Table 9 presents a list of the founders of the technology and industrial parks operating in Lower Silesia. In the case of all the parks in question, the local and regional authorities as well as higher education institutions are the main founders.

Table 9. Founders of technology and industrial parks operating in Lower Silesia Institution Founders Lower Silesian Innovation and Regional local government Science Park City Wrocław, DOZAMEL Sp. z o.o., Archimedes S.A., Wrocław Technology Park, Bombardier Wrocław Industrial Park Transportation Polska Sp. z o.o., Wojdyła Inwestycje Sp. z o.o. Municipality of Wrocław, University of Wrocław, BZ WBK Inwestycje Sp. z o.o., Wrocław University of Technology, Wrocław University of Life Sciences, Wrocław Technology Park Foundation for Development of Wrocław University of Technology, Lower Silesian Chamber of Commerce Wrocław Medical Science and Wrocław Medical University, Instytut Zarządzania i

Technology Park Samorządności Sp. z o.o., Municipality of Wrocław KGHM Letia Legnica Technology KGHM Polska Miedź S.A., Regional local Park government, Wrocław University of Technology Lower Silesian Technology Park ―T- Local governments Park‖ Nowa Ruda Industrial Park Urban Municipality of Nowa Ruda, Agencja Rozwoju Regionalnego „AGROREG‖ S.A. w Nowej Rudzie (Regional Development Agency in Nowa Ruda), Spółka Restrukturyzacji Kopalń S.A. w Katowicach Bukowice Industrial Park No data

Source: Authors‟ calculations based on data obtained from the Marshal‟s Office of Lower Silesian Voivodeship and from the individual institutions.

 Partners In most cases, the local government authorities, enterprises, financing institutions and governmental institutions as well as higher education institutions, chambers of commerce, regional development agencies, and associations are partners of the technology and industrial parks. Cooperation between the parks and their institutional partners leads to common implementation methods and goals such as, for example:

 Higher education institutions – under the Higher Education Law: ―Art. 86.1. In 141 order to ensure better use of the intellectual and technological potential of higher education institutions and the transfer of research findings to the economy, higher education institutions may operate academic business incubators and technology transfer centres‖;

 Chambers of commerce – under the Law on Chambers of Commerce – ―To create conditions for the development of economic life and to support economic initiatives of their members, to support, in collaboration with competent educational authorities, the development of vocational education, to support vocational teaching at workplaces and professional development of employees‖;

 Local government (City, Voivodeship), Regional Development Agencies – to increase investment attractiveness, spatial planning, to create complementary technical infrastructure, territorial marketing, business promotion, financial support to SMEs through the implementation of regional programmes, to attract

and support foreign investors, or to assist in obtaining funds from EU support programmes;

 Entrepreneurs – to strengthen the competitive position through the implementation of a new line of products, to improve technologies, to cooperate with scientific institutions, to build a network of cooperation;

 Financial institutions – to create and expand the market for new financial services by introducing new services for enterprises or investment in innovative projects.

11.1.4. Support of the development of industrial, technology and science parks in relation to the strategic documents of Lower Silesian Voivodeship The provisions contained in the strategic documents of Lower Silesian Voivodeship relating to the creation and support of technology, industrial and science parks show a very important role to be played by these initiatives in the region‘s socio-economic development. These documents not only set out the development of parks as a strategic goal, but they also indicate methods by which this development can be achieved and, first of all, sources of financing for projects implemented by the parks and their tenants. 142

The provisions concerning the establishment and support of parks are included in the following regional-level strategic documents: Lower Silesian Voivodeship Development Strategy (LSV DS), Lower Silesian Innovation Strategy (LSIS), and Spatial Development Plan for Lower Silesian Voivodeship (SDP LSV).

In LSV DS, the provisions pertaining to the establishment and support of parks are indirectly consolidated under the following objective: ―To build a competitive and innovative economy of Lower Silesia‖. This objective assumes the achievement of a high and stable rate of growth and economic development as well as an improvement in the competitiveness of Lower Silesia as a region attractive to invest and to conduct innovative business activities on a long-term basis by using endogenous development factors. The most important object of these measures is to create a network of connections between support institutions and entrepreneurs as well as to disseminate knowledge on the conditions and the specificity of the region‘s economy among entrepreneurs by supporting regional bridge institutions between the environment and the economy. As a potential source of financing for the implementation of these objectives, LSV DS indicates the following: public Community funds,

public national funds from the state budget and from budgets of local governments, funds of public sector entities and public sector units with other organisational and legal forms as well as public foreign aid.

LSIS indicates parks as an essential element of the Regional Innovation System providing innovation support services. Projects, showing sources of funding for research and development activities of enterprises, are carried out as part of the implementation of Strategic Objective 2 ―Increase the chance for success of innovative business projects‖, implemented by Operational Objective 2.2 ―Support research and development activities in enterprises‖, Measure Direction 2.2.2 ―Support research and development activities carried out by enterprises‖, limited to Measure 2.2.2.1 ―Venture Kick‖ - fora for research ideas of enterprises. Support will be given to projects involving organisation of meetings with idea originators, evaluation of R&D proposals by potential investors and subsequently the signing of agreements for cooperation and financing of selected R&D proposals. LSIS provides for financing of projects supporting the development of parks from public Community funds indicating, in the current financial perspective, Measure 5.3 of the Innovative Economy Operational Programme (IEOP) as the one that will provide funding for beneficiaries‘ projects essential from the point of view of the strategic assumptions of LSIS.

SDP LSV shows support to the development of parks as one of problem areas of social and 143 economic stimulation. This document mentions the development of important social and economic nodes as an essential direction of spatial policy and support provided to technology parks and logistic services. SDP LSV also assumes the creation of two Technology Parks, Convention Bureau, Congress Centre, and Wrocław Integrated Logistics Centre. It also points out to the need to support special areas that include, among others, the Wrocław Technology Park. Similarly to the two previous documents, SDP LSV indicates financing from the Structural Funds and the Cohesion Fund as well as public financing from central and local government funds as sources of funding.

The implementation of the provisions contained in Lower Silesia‘s strategic programmes relating to the development of parks became feasible only when the operational programmes were established (the initial programming period 2004-2006), which was associated with the implementation of Measure 1.3 ―Creation of favourable conditions for the development of enterprises‖ under the Sectoral Operational Programme ―Improvement in the competitiveness of enterprises‖ (SOP ICE 2004-2006). The aim of Measure 1.3 was to improve business conditions for enterprises in the area of technical infrastructure and management consultancy. Thanks to the support obtained under SOP ICE by the

programme beneficiaries such as regional development agencies, foundations, associations and legal entities with the participation of regional and local governments, a part of the parks currently active in Lower Silesia were established (among others, Nowa Ruda Technology Park or Wrocław Technology Park).

During the period 2007-2013, both the founders and tenants of the already existing parks could and still can apply again for financial support from the EU funds. Funding for this purpose is allocated in the Innovative Economy Operational Programme (IE OP), mainly under Measure 5.3 ―Support for innovation centres‖ and in the Regional Operational Programme for Lower Silesian Voivodeship for 2007–2013 (ROP LSV) under Priority 1.

Within the framework of the Regional Operational Programme for Lower Silesian Voivodeship, the parks can obtain support through the implementation of projects co- financed under Priority 1: Improvement in the competitiveness of Lower Silesian enterprises (―Enterprises and innovation‖). In order to maintain a demarcation line between ROP LSV and IE OP, co-financing from ROP LSV can only be obtained by investment projects designed to create and develop infrastructure supporting innovation and investment projects aimed at establishing and developing industrial parks located in high unemployment areas and in support areas indicated under Priority IX ―Cities‖ or by projects using technical infrastructure left after restructured or liquidated enterprises. 144

The parks may apply for co-financing of other projects under the Innovative Economy Operational Programme for 2007 – 2013, including through Measure 5.3 ―Support for innovation centres‖. As opposed to ROP LSV, this measure is aimed at facilitating for entrepreneurs access to comprehensive high-quality services relating to internationalisation of business activities and at increasing the level of investment by enhancing attractiveness of locations for investment projects. It also provides access to comprehensive services for entrepreneurs seeking to introduce new solutions and for scientists who wish to start business activities. As a result of these provisions, the local governments eagerly participate in the creation of technology parks, which are a platform for joint work of business and scientific communities. The support provided under IE OP is primarily used by highly specialised business support institutions providing services of high market and technological potential and implementing projects involving the preparation of technology park development strategies and consultancy in this area. Under IE OP, financial support can only be obtained by parks that are located in areas with high growth potential or in which it is planned to create a package of services for entrepreneurs which contribute to the diversification of their business within the region. However, these restrictions do not apply to

park tenants who may apply for financing for projects implemented by them under a larger number of IE OP Measures: 1.4 and 4.1 – projects involving support for research and implementation of R&D results; 3.1 – projects relating to start-ups; 3.3 - projects relating to the creation of systems facilitating investment in SMEs; 5.1 – projects relating to clusters; 5.2 – projects involving support for business environment institutions and their networks; and 5.4 – projects relating to intellectual property management.

In addition to the above described operational programmes under which Community funds are used, the parks may also count on support from the local government units and co- financing from public foreign aid.

Figure 2. Pathway to establish and support the development of industrial, technology and science parks in Lower Silesia

145

LSV DS - Lower Silesian Voivodeship Development Strategy LSIS - Lower Silesian Innovation Strategy SOP ICE - Sectoral Operational Programme ―Improvement in the competitiveness of enterprises‖ SDP LSV - Spatial Development Plan for Lower Silesian Voivodeship IE OP - Innovative Economy Operational Programme ROP LSV Regional Operational Programme for Lower Silesian Voivodeship for 2007–2013 Source: Authors‘ research.

12.0 Resume and overview of experiences from other EU-Projects (lessons and good practice from previous project experiences)

The Wrocław Regional Development Agency (WARR) started its activities in 1998, during the time when new local governments were formed and the concept of European integration came into being. Throughout the whole period of its operation, WARR‘s mission has not changed substantially and is still associated with supporting the development of the Lower Silesia region. This mission is as follows:

“The mission of the Wrocław Regional Development Agency is to support local governments and businesses in their activities contributing to the development of Lower Silesia and the Odra River region.”

Over the period of thirteen years of its operations, the Wrocław Regional Development Agency has implemented several dozen projects, with a large part of them being projects of European significance carried out in regional or international cooperation, frequently under different European programmes. The matrix below (Figure 3) presents a list of projects implemented by WARR. They are broken down into projects of European importance, EU related projects carried out with the participation of foreign partners under European Funding 146 Programmes (e.g. FP6, FP7, INTERREG IIIC, INTERREG IVA), and other specific projects implemented at a European, national or regional level, or individually. The experience gained in these projects can be used during the implementation of the STEP project.

Figure 3 Projects implemented by Wroclaw Regional Development Agency (WARR) - linked to the STEP subproject

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Source: authors‟ own data.

 Lessons and good practices from previous WARR projects

On the basis of an analysis of the projects implemented by WARR, an attempt has been made to identify good practices and lessons learned that may prove useful and be incorporated in the implementation of successive stages of the STEP project. A number of good practices and lessons learned have been diagnosed, including 6 practical ones and 4 thematic ones.

PRACTICE LESSONS: 1P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Efficient Internet platform for cooperation between innovative SMEs 2 Precise theme/ Support for innovative SMEs Issue tackled by the practice 3 Objective of the The main aim of the portal was to act as a cooperation broker practice in the areas of research and development, new products, new markets, human resources and location development— allowing for concrete cooperation between potential business partners from selected industries (automotive industry, metal processing, energy and environmental, chemical industry, plastics, enabling technologies, micro-electronics, textiles, glass and ceramics, food industry and building materials). 4 Location German federal states of Saxony and Brandenburg, the Czech regions of Liberec, Ústí and Karlovy Vary and the Polish Voivodeships – Wielkopolska, Lower Silesia and Lubuskie 5 Detailed description The practice comes from the 3-CIP that was an interregional of the practice co-operation project under the European Community Initiative INTERREG III C (January 2004 – December 2005, total budget 975 612 EUR). Bodies involved in the project: Brandenburg Economic Development Board, Saxony Economic Development Corporation, Regional Development Agency of the Liberec Region, Regional Office of the Ústí 148 Region, Regional Development Agency Egrensis, Marshal Office of the Wielkopolska Region, Wrocław Regional Development Agency , Marshal Office of the Lubuskie Province. Project was directed to strengthen the economic potential of regions and to competitiveness of enterprises through developing capabilities of technology transfer from research units and centers to SMEs and to support the existing and newly formed industry cooperation networks covering the borders regions of Poland, Czech Republic and Germany in selected branches. Establishment of 3-Countries joint co-operation and innovation portal was one of the project

components. The Internet portal has been released on the 4th of October 2004, as a platform with a joint three national and 4-lingual information- and communication base of the 3- CIP partners from Germany, Czech Republic and Poland. The portal considers itself mainly as a service for the Core Branch Teams as well as for enterprises and innovative networks. The Website became a network navigator to support SME by across national partner searches and co- operations initiations. The Web Portal contributed to the strengthening contacts between beneficiaries, sectors (among others small and medium-sized enterprises representing automotive industry, metal processing, energy and environmental, chemical industry, plastics, enabling technologies, micro-electronics, textiles, glass and ceramics,

food industry and building materials) and stakeholders (involving policy-makers at the local, regional and national level) in the partner regions. 6 Evaluation Efficient Internet platform contributed to: the mutual selection of nine core branches, the successful implementation and documentation of eight core branch conferences with more than 600 participants, of which 50 % were entrepreneurs, as well as the identification and public acknowledgement of 19 best practice examples all represent valuable navigational guidance and support measures for enterprises, networks, and branches in cross-border cooperation and innovation. The effectiveness of the portal was made possible due to its benefits as an/a: 1. Information Platform: - Providing constantly updated information on such branch-related events as trade shows, core branch conference and network initiatives, - Informing about the objectives, target groups, and activities within the scope of 3-CIP, - Introducing the joint 3- country, cross-border economic region, - Presenting the primary objectives and potentials of the participating branches, - Presenting the project results (best practices and SWOT analyses) and encouraging the continuation of the projects. 2. Navigation Platform: - Providing links to core branch initiatives, networks, loan programs, and supporting institutions, 149 - Offering information about contact persons within core branches and associated networks, - Presenting network projects. 7 Lessons learnt from Using the website as an administration, multilingual the practice communication, promotion and implementation tool makes the collaboration among innovative SMEs, including ones operating in technology parks, more intense and easier as well as the project management more effective. 8 Contact information Gerhard Kirkamm Project Co-ordinator Bertolt-Brecht-Allee 24 D-01309 Dresden Phone:+49 351 213 8371 Email: [email protected] 9 Other possible www.3-CIP.com interesting www.wfs.sachsen.de information

2P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Efficient Internet platform for manufacturing development and collaboration

2 Precise theme/ Support for manufacturing development Issue tackled by the practice 3 Objective of the The collection and analysis of information relating to needs practice and requirements of manufacturing in the regions, assistance in seeking partners for SMEs in order to form project consortia and to organize three international calls for proposals for R&D projects targeted at small and medium- sized enterprises. Dissemination of the information at two levels: 1. strategic level - with corporate information of participating programmes, agencies and long term results, 2. operational level - with info on the results produced as well as a tool for the joint calls: brokerage prior to the call (expressions of interest tool), announcement of the conferences and the calls, call materials, etc. 4 Location 24 partners from 14 countries: Spain, Estonia, France, Germany, Poland, Austria, Italy, Romania, Slovakia, Slovenia, Netherlands, Belgium, Finland and Greece 5 Detailed description The practice comes from the MANUNET SSA (Specific of the practice Support Action) that was born in 2004 as an initiative of the Basque Government which decided to generate a continental initiative to move towards a European regionally-based Research Area on manufacturing. The SSA laid the foundations to the CA (Coordination Action) with the same name. MANUNET was launched on 1st April 2006 with the aim of guiding SMEs towards the European Research Area. Currently MANUNET II launched on 1st April 2011 with a duration of 4 years. It is composed by 24 partners from 14 150 countries. The Department of Industry, Trade and Tourism of the Basque Government and the Basque Innovation Agency (Innobasque) are the coordinators of the project. The MANUNET web site was created as the management tool where the general public information about MANUNET and its call for proposals (with specific description of objectives and topics, participants, eligible projects, application procedure and funding programs) can be included. Several documents (e.g. guide for proposers, frequently asked questions documents, etc.) where created in order to inform the companies represent most important manufacturing sectors in detail about the calls. When call is launched or conference celebrated, paper brochure are created. Moreover, each partner in the consortia creates informative documentation in its own language for the potential participants. Furthermore, success stories from previous calls with detailed information about the projects are publishing on the website. Project was financed from EU 6th Framework Programme funds (2006-2010). 6 Evaluation MANUNET launched 4 successful calls for proposals from 2007 to 2010. Planned goals of the projects have been achieved: yearly calls for proposals, 513 proposals received in 4 calls, high involvement of SMEs (more than 1200 in 4 calls), high success ratio (around 30%)

7 Lessons learnt from Using the website as an instrument to intensify collaboration the practice among manufacturers, including ones operating in technology parks, in different regions in the field of research and development 8. Contact information Andere Goirigolzarri Pargue Tecnológico de Bizkaia – Laida Bidea 203 Zamudio Bizkaia 48170 Basque Country / Spain Phone: +34 944 209 488 Fax: +34 944 209 489 9 Other possible www.manunet.net interesting information

3P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Specific methodology of transferring know-how and technology 2 Precise theme/ Benchmarking policies and instruments for business support Issue tackled by the practice 3 Objective of the Benchmark of best practices in the area of business support practice at regional and sub-regional levels. Following on from this was the need to create tools and mechanisms that will transfer this best practice from one of the exemplar regions to another in the project. 151 4 Location The project built involved 14 European regions from 9 countries, including Spain, Italy, France, Poland, Finland, Denmark, Belgium, Germany and Norway. 5 Detailed description The practice comes from EURBEST (July 2003 - June 2006) of the practice project focused on benchmarking policies and instruments for business support. It was submitted to the INTERREG IIIC 1st call for proposals and on April 2003 it was approved a grant of up to EUR 1,100,000 from the European Regional Development Fund (ERDF). With a time schedule of three years, the five major tasks or components to be carried out by the partners will be Managing, Quantitative Analysis, Qualitative Analysis, Transfer and Knowledge Dissemination. Project was aimed to identify best practices for regional authorities wishing to provide business support services. The project was built on the basis of work undertaken in the EURADA European Benchmarking project which developed models to identify best practice in the area of business support at regional and sub regional level. The project has 2 different strands that were used for comparison. A Qualitative and a Quantitative strand. The Qualitative strand was a group of 8 regions that meet on a regular basis in partner regions to discuss an agreed topic i.e. clusters. At these meetings the participants each presented to the group the mechanism in their region that best addresses the needs of that given support structure i.e. cluster polices and financial support.

This group was composed of high level representatives from the regions - this was to ensure that the outcomes of the project and the study tours individually could be effectively and quickly absorbed by the participating regions. The Quantitative stand of the project involves all project members and was a statistical based model. All partners were required to complete in depth statistical analysis of their regions business support structures and reported on how they have seen success/failure in given measures. Regions had to provide details on how much resource they put into certain support structures and what the results were coming out of this intervention. Regions were also required to provide a substantial amount of data concerning their region and the specific agency they worked for in order to make the comparison useful. Transfer of the 'good practices' was a key objective. 6 Evaluation The EURBEST operation had created new tools, methodologies and mechanisms to achieve the results in the area of business support, especially the identification of best practice at regional level in Europe, the transfer of best practice between regions, and verifying best practice and disseminating information about best practice in Europe. Activities included regular study tours between groups of eight project partners and dissemination via various information tools such as newsletters, websites and reports. Through EURBEST, regions were improving their ability to intervene using public policy and financial instruments to improve business support. Furthermore, representatives from Regional Development Agencies were benefiting from the 152 decrease in duplication of policy information as well as the increased credibility of this interregional cooperation approach. By using the jointly developed tools, the project participants managed to identify 39 best practices (out of which 11 were implemented by the project partners), in the form of programs, contests, and other undertakings implemented by them, aimed to support enterprise development were identified among the project participants. What is more, obstacles were identified which make it difficult for institutions supporting enterprises to reach target groups for their services. At the end, a cooperation network was created among the project participants, under which the implementation of joint undertakings and new projects will be continued by using a website. 7 Lessons learnt from Transferring of know-how through study-visits and staff the practice exchanges can help to identify best practices in the field of competitions and other activities aimed at supporting the development of entrepreneurship in technology parks. 8 Contact information John Edwards Advantage West Midlands 3 Priestly Wharf, Holt St, Aston Science Park B7 4BN UNITED KINGDOM Tel: 00 441213803544

Email: [email protected] 9 Other possible www.interreg3c.net interesting www.eurbest.com information

4P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Effective methods of collaboration between RIS (Regional Innovation System “triple helix”) elements in the formation of the technology park 2 Precise theme/ Issue tackled Establishing technology parks by the practice 3 Objective of the practice Main aim of the practice was to carry out actions leading to the establishment of the Lower Silesian Innovation and Science Park 4 Location Lower Silesia, Wrocław 5 Detailed description of the The process of the establishment of the Lower practice Silesian Innovation and Science Park was started in January 2006 by the signing of an agreement of intent by the local government and city authorities (Lower Silesian Voivodeship (region), City of Wrocław), Wrocław University of Technology, Municipal Water Supply and Sewerage Company and business support institutions (Wrocław Regional Development Agency, Wrocław Agglomeration Development Agency). 153 The cooperation between the above mentioned institutions had the following form: - Lower Silesian Voivodeship – financial support; - Municipal Water Supply and Sewerage Company – provision of land owned by the company for the construction of the Park; - City of Wrocław – a declaration that future tenants of the Park would be granted tax reliefs and exemptions; - Wrocław University of Technology – involvement of the University‘s scientific potential in the Park‘s activities; - business support institutions – coordination of organisational and legal tasks. 6 Evaluation Consistent cooperation between elements of the Regional Innovation System (RIS) led to the formation of the Lower Silesian Innovation and Science Park, whose share capital was PLN 10,250,000 at the initial stage of its operation. During the first period of the Park‘s activities, this institution was only involved in the implementation of soft projects (a total of 16 projects, including, e.g., Innovation Incubator – initiation of business activities based on innovative inventions; spin-off and spin-out Ac@demy; Cooperation of science and enterprises

forming the basis for the construction of networks and for innovation in Lower Silesia; Next Generation Science Park; Development and promotion of the Cluster of Innovative Manufacturing Technologies in Lower Silesia). 7 Lessons learnt from the The implementation of work contributing to the practice formation of the Lower Silesian Innovation and Science Park allowed us to better identify RIS elements as well as to acquire and improve the ability to undertake effective actions designed to ensure effective cooperation between these elements. 8 Contact information Lower Silesian Innovation and Science Park ul. Wystawowa 1, 51-618 Wrocław tel. (+48) 071 725 40 41 fax (+48) 071 723 13 05 E-mail: [email protected] 9 Other possible interesting www.dpin.pl information

5P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Investor Assistance Center 2 Precise theme/ Issue tackled Support for foreign investors by the practice 3 Objective of the practice One of the main goals of the Centre‘s activities was to provide comprehensive support and assistance to 154 foreign investors in the implementation of investment projects in Lower Silesia, including, among others, the organization of investors‘ visits in the region and their meetings with business partners and representatives of authorities at all levels as well as searching for trade partners, suppliers. and business partners. 4 Location Lower Silesia 5 Detailed description of the From the start of its operation, the Wrocław Regional practice Development Agency has focused its activities on supporting foreign investors. In 1998 the Investor Assistance Centre was created within the structures of the Agency; it was a specialised unit responsible for developing strategies for entering the Polish market by various firms, seeking business partners and subcontractors for production, and preparing analyses on investment locations. In 2001 WARR formalised its cooperation with the Polish Foreign Investment Agency, continued since 1998, by signing with this Agency (it is now called the Polish Information and Foreign Investment Agency (PAIiIZ)) a cooperation agreement to run the regional Investor Assistance Centre. The activities of the Investor Assistance Centre, the longest operating centre of this kind in Poland (1998- 2008), were focused on providing support and

assistance to foreign investors, including those from the automotive industry, in the implementation of investment projects in the Lower Silesia region. The main tasks of the Centre were related to the development of strategies for entering the Polish market, seeking business partners and subcontractors for production, the preparation of analyses of the most advantageous locations for firms and the search for appropriate properties, also for automotive industry firms. The most important tasks of the Centre included the following: 1. To create and update on an ongoing basis greenfield and brownfield investment offers; 2. To create and update the regional list of subsuppliers by economic sectors and the database of entrepreneurs; 3. To support foreign investors interested in locating their investments in the Lower Silesia region; 4. To cooperate with the Polish Information and Foreign Investment Agency; 5. To collect and disseminate information on the region. 6. Activities promoting the region and its investment climate, including trade or investment missions, business conferences, preparation of plans for foreign expansion by investors. 6 Evaluation Comprehensive support of the investment process of 155 the company BOSCH, a manufacturer of braking systems, was the most important from the point of view of implementation of the STEP project. The location-finding process and acquisition of land in Długołęka Gmina (municipality) near Wrocław ended in a success. The Agency supported the investor in its contacts with the central and local government offices and institutions in order to obtain permits and approvals necessary to start the construction project. WARR also performed a coordinating role at the stage of preparation of infrastructure for the future factory. In the next years, WARR supported the company BOSCH in its activities at all stages of the construction process. Thus, the Agency reinforced its position as an important partner for foreign investors. In addition to the investment process carried out by BOSCH, the Investor Assistance Centre also supported investment projects of other automotive industry companies such as, e.g., Leonische Draftwerke, Scania Polska, Volvo Truck Poland, BOSCH, AAM, GKN, SOR Iberica, Wabco, and Toyota. 7 Lessons learnt from the The Investor Assistance Centre is a good example of practice good practice in comprehensive support to foreign firms in the investment process, among others through the promotion of technology parks.

8 Contact information Wrocław Regional Development Agency ul. Kochanowskiego 17 51-602 Wrocław Tel. +48 71 348 30 18 E-mail: [email protected] 9 Other possible interesting www.warr.pl information

6P Type: Practice lesson L.p. Section Indication of content 1 Title of the practice Activities related to the prevention of unemployment in Lower Silesia 2 Precise theme/ Issue tackled Support and promotion of enterpreneurship and by the practice self-employment by reducing unemployment 3 Objective of the practice The main aim of the practice was to reduce unemployment, in particular among persons living in rural municipalities, mixed urban-rural municipalities and in cities with a population of up to 25 000 people, including unemployment among women (in particular those returning to the labour market after a period of absence for childbirth and child rearing or entering the labour market for the first time). 4 Location Lower Silesia 5 Detailed description of the The practice comes from project entitled ―Your own practice business an opportunity for active persons‖, implemented by Wroclaw Regional Development 156 Agency between July 2009 and May 2011 under the Human Capital Operational Programme 2007 – 2013. The Lower Silesian Voivodeship Labour Office in Wałbrzych, Wrocław Branch, was the implementing Agency (the 2nd level Intermediary Body). The main aim of the project, related to the unemployment reduction among persons living in rural municipalities, mixed urban-rural municipalities and in cities with population of up to 25 000 people, was achieved by creating the possibility of setting up and running their own business in Lower Silesia. The project target group included unemployed persons (including long - term unemployed persons) and economically inactive people who have an idea for a business and want to start their own business. Total project cost: 2 429 534, 54 PLN The project was directed to 120 people belonging to the following groups: unemployed people (90), including long-term unemployed people (5) and occupationally inactive (30). The types of assistance provided under the project:  Training and consulting for people interested in starting a business,  One-time investment grant transfer up to 40 000 PLN - the financial resources to cover expenses related to starting a business,

 Bridge support: (1) financial support amounting to 350 PLN / month (to cover insurance premiums) for up to 6 months from the date of foundation of the company, (2) consultancy and assistance in the effective use of the grant after the foundation of the company (5h consultation for one participant). The project assumed the organization of 8 closed training cycles consisting of topics listed below:  starting a business (12h),  the accounting of the business, taxes, social security (6h),  employment law, health and safety (6h),  acquisition of external capital (6h),  construction of business plans and feasibility studies for  construction of (12h),  sales and marketing (6h). Each participant at the end of the training cycle could benefit from individual consultancy (10h). During the consultations, participants received such assistance e.g. in writing a business plan to apply for a grants. After the phase of training and consulting, participants had the opportunity to apply for grant funds for development business and for support bridging. Financial resources for development of entrepreneurship have been granted to only those participants who have completed participation in the consulting stage (received certificate) and a have 157 registered business. The project provided financial support to transfer of maximum value to 40 000 PLN for the third participants in each training cycle, giving a total for the entire project 40. 6 Evaluation 119 persons participated in the project; 58 women and 61 men; 57 unemployed and 62 occupationally inactive. 40 people received start-up grants; 40 micro- enterprises were created in Lower Silesia. 40 people benefited from support in the form of interim financial assistance and consulting on effective use of grants. 7 Lessons learnt from the Training, consulting and financial support activities practice can contribute significantly to the increase in the number of companies operating in technology parks, and thus result in better exploitation of the potential of these units. 8 Contact information Wrocław Regional Development Agency ul. Kochanowskiego 17 51-602 Wrocław Tel. +48 71 348 30 18 E-mail: [email protected] 9 Other possible interesting www.warr.pl information

THEMATIC LESSONS:

1T Type: Thematic lesson L.p. Section Indication of content 1 Title of the practice Strengths and weakness of the automotive industry in the Czech and Polish regions 2 Location Lower Silesia and the Czech regions of Liberec, Ústí and Karlovy Vary 3 Origin 3-CIP Project 4 Lessons learnt from WARR participated in work associated with the preparation of the practice a SWOT analysis of key industries in Lower Silesia, including the automotive industry: Strengths: • 3 Special Economic Zones, including the Wałbrzych Special Economic Zone particularly oriented towards the automotive industry; • car-making tradition in the region (―Jelcz‖ Factory); • a large number of automotive industry companies; • a large number of domestic automotive industry subsuppliers; • high investment attractiveness of the region; • Wrocław University of Technology and its Mechanical Faculty as a source of skilled labour; • European transport corridors running through the region; • large investments in technical infrastructure; • well-developed transport infrastructure. 158 Weaknesses: • no car assembly plant; • bad habits and a lack of trained staff with experience in the automotive industry; • a lack of experience in the establishment of networks of enterprises; • insufficient cross-border exchange of experience; • a large number of small businesses experiencing economic difficulties; • too slow a pace of innovation in enterprises; • insufficient knowledge of the region‘s values among potential investors; • structural unemployment resulting in shortages of skilled labour; • the lack of a ring road causing difficulties in transportation in the region. Opportunities: • establishment of a car assembly plant in the region; • development of the special economic zones; • financial support for the border regions from the EU aid funds; • recovery in the Japanese economy – it is possible that a prestigious investor from this country will invest in the region; • completion of the construction of the motorway

connecting Lower and Upper Silesia; • easier entry into new markets in the neighbouring countries due to the proximity of their borders. Threats: • the neighbours from the Czech Republic and Slovakia can attract investments; • the Special Economic Zones will operate only until 2017; • competition from enterprises from the neighbouring countries, • emigration of highly skilled workforce to other EU countries; • insufficient budgetary allocations for the development of science. A similar analysis was made for the Czech regions. 5 Contact information Gerhard Kirkamm Project Co-ordinator Bertolt-Brecht-Allee 24 D-01309 Dresden Phone:+49 351 213 8371 Email: [email protected] 6 Other possible www.3-CIP.com interesting www.wfs.sachsen.de information

2T Type: Thematic lesson L.p. Section Indication of content 159 1 Title of the practice Best practices of the automotive industry in the Czech, German and Polish regions 2 Location German federal states of Saxony and Brandenburg, the Czech regions of Liberec, Ústí and Karlovy Vary and the Polish Voivodeships – Wielkopolska, Lower Silesia and Lubuskie. 3 Origin 3-CIP Project 4 Lessons learnt from Generally, under the 3-CIP project a total of 19 good the practice practices were identified for the main manufacturing sectors of the Polish, German and Czech regions which were grouped in four separate categories (innovation, cooperation, public-private partnership, human resources). Among all good practices, 4 of them related to the car industry:

 Innovation (Gedia Poland - GEDIA‘s engineers are dedicated to new concepts in design, functionality, and ergonomics. GEDIA has thus set new standards in metalworking and surface finishing technology. GEDIA is also willing to invest in innovation - whether by adopting advanced manufacturing routes or via GEDIA‘s in-house tool development and prototype fabrication activities.),  Cooperation (Käppler & Pausch GmbH and RUG METAL Sp.z o.o. - German input at the beginning of the cooperation: technology, experience with work

organization, Polish input at the beginning of the cooperation: market knowledge, face-to-face contacts. Cooperation has been expanding with the aim to extend the so called "process chain steel- plate" and therewith consolidation of the production chain.),  Public – Private Partnership (BOS Automotive Products CZ s.r.o. and Technical University Liberec - support of Lay Outs and Time Studies in the Production in the form of diploma thesis for Students of Manufacturing Systems  Human Resources (BOS Automotive Products CZ s.r.o - Number of skilled engineers / technicals / students)

5 Contact information Gerhard Kirkamm Project Co-ordinator Bertolt-Brecht-Allee 24 D-01309 Dresden Phone:+49 351 213 8371 Email: [email protected] 6 Other possible www.3-CIP.com interesting www.wfs.sachsen.de information

3T Type: Thematic lesson L.p. Section Indication of content 160 1 Title of the practice Foreign direct investment, an informal cluster of the automotive industry, and assessment of links between RIS (Regional Innovation System “triple helix”) elements. 2 Location Lower Silesia region, other partners in project represent Germany, Italy, Estonia, Austria and Ireland. 3 Origin The Knowledge Economy, Economic Transformations and ICT in the EU25+: Regional Dynamics in the Deployment Phase 4 Lessons learnt from The study conducted under this project shows that relatively the practice cheap and well educated labour force contributed to an increase in the volume of foreign direct investment, including, among others, in the automotive sectors. The period of economic transformation in Poland at the beginning of the 1990‘s created advantageous conditions attracting foreign enterprises which started to perceive Poland as a good place to invest their capital. The best examples for FDI in this region are investments of the companies LG (the largest investment in Poland in the ICT sector - € 800 million), Google, Hewlett-Packard, Siemens, Bosch, Volvo. Hence, the presence of many global flagship companies in the region generates market opportunities for many local SMEs that become their suppliers. Industry-specific concentration of enterprises in Lower Silesia correlates with their spatial concentration in selected examples, which also takes place in the case of the automotive industry. The firms from this industry form an

informal cluster that comprises enterprises such as Toyota, Volvo, Volkswagen, Bosch, Faurecia, WABCO and many other subsuppliers of these companies. The current links between RIS elements are weak and need to be improved. There are many elements in the region constituting the RIS. However, cooperation between them is not fully in line with the expectations. It is shown that a relatively high level of cooperation takes place between enterprises, but in the case of other links, necessary steps should be taken in order to enhance the process of collaboration. Furthermore, such collaboration might be more effective thanks to the implementation of an information platform that could facilitate links between enterprises, knowledge providers, supporting institutions as well as local authorities and eliminate flaws that hamper collaboration between them. The lack of appropriate partners and the poor identification of their needs are two examples of such flaws indicated by the market participants. Implementation of the information platform could help local authorities, supporting institutions and knowledge providers to understand properly foreign and local businesses‘ problems, as a condition for their successful participation in regional development. It is particularly important for SMEs that depend more on external resources than large enterprises. 5 Contact information Marc Bogdanowicz European Commission's Joint Research Centre The Institute for Prospective Technological Studies E-mail: [email protected] 6 Other possible http://is.jrc.ec.europa.eu/ 161 interesting www.warr.pl information

4T Type: Thematic lesson L.p. Section Indication of content 1 Title of the practice Impact of the border localization on the development of automotive sector in Polish and German border regions 2 Location Country, region or district or metropolitan area or municipality 3 Origin Normal Business Restored: Reviving the Border Region Economy in a new era of devolved government 4 Lessons learnt from The study implemented under the project ―International the practice Regional Studies of the Border Region‖ shows that the transboundary geographical location of NUTS-4 and NUTS-5 units directly bordering the Czech Republic or Germany does not stimulate the development of manufacturing activities in their territory, but it only has an effect on the intensification of service activities, including border trade. Manufacturing activities, including the production of vehicles, is concentrated in the special economic zones near subregional growth centres such as, e.g., Wrocław or Wałbrzych. 5 Contact information Dr. John Bradley The Economic and Social Research Institute is located at: Whitaker Square

Sir John Rogerson's Quay Dublin 2. Telephone +353 1 8632000 Fax +353 1 8632100 6 Other possible www.esri.ie interesting information

162

13.0 Regional Mapping of the Automotive Industry

13.1 The automotive sector in Poland In recent years in several Central and Eastern Europe countries, such as Poland, Slovakia, Czech Republic, and Hungary, many foreign car manufacturers, such as Ford, Toyota, Kia, Porsche, Peugeot, Volkswagen, Fiat, have opened their assembly lines and factories manufacturing automotive components, thus creating a new automotive cluster at the European level which is now at the stage of growth. Although Poland is a part of this automotive cluster, the automotive industry at the national level is primarily concentrated around the four largest agglomerations: Warsaw, Wrocław, Katowice, and Poznań. Such a distribution results from the proximity of target export markets, such as Germany, as well as from the proximity of large manufacturing plants in the Czech Republic and Slovakia which are the market for Polish suppliers of automotive components and parts. In Poland there now are 2600 manufacturers of cars and automotive components, including more than 250 companies with foreign capital. Since 1995, 180 greenfield manufacturing plants have been constructed, mainly by foreign investors. Out of the 100 largest global suppliers in the auto industry, 48 are found in Poland. In total, 39 factories as well as 4 research and development centres have been built in Poland by 9 out of the 10 largest automotive industry suppliers. Altogether, 19 R&D units operate in the automotive sector in Poland10. 163 As shown by numerous studies in this area11, the automotive industry in Poland is of extreme importance to the national economy and the labour market, producing over 10% of industrial output. Thanks to many investments of foreign auto companies, Poland has become one of the largest car producers in the region of Central and Eastern Europe (out of the 40 factories involved in car assembly or manufacture of car engines, 16 are located in our country). The whole sector, including subsuppliers, provides employment to about 600,000 people, and nearly 140,000 people are employed directly in car manufacturing. Comparing the years 2008 and 2010, at the end of 2010 employment was lower by 16,700 jobs than in the second half of 200812.

10 Frost & Sullivan, Polish Information and Foreign Investment Agency, ―White paper – Clusters, Technology Parks and Incubators in Poland‖, October 2008. 11 - Kosiba J., Lasota S., Markiewicz- Patkowska J., Sebastian Z., Wągiel J., ―Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia‖, Lower Silesian Chamber of Commerce, and Mirosław Wróbel Sp. z o. o. Authorised Mercedes-Benz Dealer, Wrocław, 2010. - Polish Automotive Industry Association, ―Report on the automotive industry, 2011‖, KPMG, Baker & McKenzie, Warsaw 2011. - Polish Automotive Industry Association, ―Report on the automotive industry, 2010‖, KPMG, Baker & McKenzie, Warsaw 2010. 12 Polish Automotive Industry Association, ―Report on the automotive industry, 2011‖, KPMG, Baker & McKenzie, Warsaw 2011.

In 2010 automotive industry exports exceeded €17 billion, i.e. 7.8% more than in 2009, but by as much as €1.44 billion less than in 2008. 86.9% of exports went to the EU countries (3.5% less than the year before). This decrease results from an increase in exports to non- EU countries, which was more than 46% in 2010. Among the ten largest markets that accounted for 82% of foreign sales, exports increased with respect to nine of them – only exports to Italy declined by over 12%. Exports to Germany, the biggest customer for Polish auto products, increased by slightly less than 0.6%, to France by less than 12%, to the United Kingdom by more than 11%, and to Spain by nearly 30.5%. Polish automotive exports comprise three main groups: passenger cars and light commercial vehicles (the value of exports was €6.64 billion in 2010), parts and accessories (the value of exports was €5.71 billion in 2010), and compression-ignition engines (the value of exports was €2 billion)10.

Figure 4. A) Automotive industry exports in Poland [in EUR billion]; B) The biggest importers for the Polish automotive industry in 2010 [in EUR million] A) B)

164

Source: Polish Automotive Industry Association, “Report on the automotive industry, 2011”, KPMG, Baker & McKenzie, Warsaw 2011.

In spite of the fact that 2329 enterprises were involved in the manufacture of motor vehicles at the end of 2009, most of them Polish companies, the Polish car industry is based on foreign investment. All the large plants producing cars and car parts (excluding the company Solaris manufacturing buses) are foreign companies. The high share of foreign direct investment (FDI) in the auto industry forms the basis for the dynamic development of the pool of Polish subsuppliers. Poland has now become a leading producer of car components, including engines, tyres, car seats and upholstery, car electronics, electric cables, and braking systems, for car makers such as: Mercedes, Nissan, Opel, Porsche, Toyota, Volkswagen, Isuzu, Fiat, Citroen, Honda, Peugeot, Volvo, BMW, Rolls-Royce, Lamborghini, and Ferrari. In 2009 FDI inflows to Poland declined by 17.7% compared to 2008, and this

decline was particularly noticeable in the automotive sector, one of the hardest-hit by the global economic crisis. In effect, there was a reduction in orders, a part of the factories were closed down, and some of the multinational corporations declared bankruptcy. Nevertheless, in spite of a felt crisis, the automotive industry maintained the position of the key branch of Polish manufacturing, primarily thanks to new investments (Fiat Powertrain Technologies (Bielsko-Biała), AAM Poland (Świdnica), Guardian Automotive Poland (Bolesławiec), TBAI Poland (Nowogrodziec), VOSS Automotive Poland (Legnickie Pole), Pittsburgh Glass Works (Środa Śląska)). Overall in the period 1998 – 2009, foreign investments in the Polish automotive sector totalled €4.35 billion (4.9% of total foreign investment in Poland).

In 2009 the total number of motor vehicles in Poland, in spite of a decline in its growth rate, was 22 million vehicles, i.e. 3.2% more than in 2008 (Figure 5). In 2009 a total of 16.5 million passenger cars were registered in Poland, first registrations of motor vehicles amounted to 1,109,200 (1,553,900 the year before), including 864,300 passenger cars (1,280,600 in 2008) as well as 170,000 trucks and road tractors (185,300 the year before). In 2009 there were 432 passenger cars per 1000 people in Poland. This number was 422 cars the year before. The slight increase in the total number of motor vehicles was attributable to low imports of second-hand automobiles, since second-hand car imports were 693,300; these imports were significantly lower than in the previous year, when they had reached the number of 1,103,900. The import of second-hand cars in great numbers also produced 165 adverse effects, i.e. it accelerated the process of aging of vehicles in Poland – cars more than 4 years old are predominant in private imports (88.2 per cent in the previous year). 46.5% of passenger cars registered in Poland were from six to fifteen years old, and 34.7% of the total number of cars were between sixteen and thirty years old13

13 Polish Automotive Industry Association, “Report on the automotive industry, 2011”, KPMG, Baker & McKenzie, Warsaw 2011.

Figure 5 Motor vehicles in Poland [in thousand]

Source: Polish Automotive Industry Association, “Report on the automotive industry, 2011”, KPMG, Baker & McKenzie, Warsaw 2011.

In Poland the manufacture of passenger cars is the main subsector of the automotive industry. In the period 2007 – 2008, the production of passenger cars in Poland increased more than 11.8%, from a level of 762,000 units in 2007 up to 864,200 units in 2008. Taking into account also commercial vehicles and the increase in their production over the same period (from 107,600 units in 2007 up to 126,800 units in 2008), the total increase in production was slightly higher and it was 12.3%. In 2009, due to the global crisis, there was a decline in passenger car production by 5.2% (818,800 units), and if commercial vehicles 166 are included, this decline was 12.1% (870,900 units). In the next year (2010), 887,301 passenger cars and light commercial vehicles left the Polish factories, including 799,255 passenger cars (Figure 6), which accounted for 90.1% of annual output (the year before it was 92.62%). The increase in the share of light commercial vehicles is evidence of the increasing activity of small enterprises and a symptom of increased demand for this type of vehicles.

Fiat Auto Poland is the biggest car manufacturer. In 2010 Fiat‘s factory in the city of Tychy (Upper Silesia region) produced more than 522,600 cars (12.6% less than in 2009). In the period 2009 – 2010, FSO recorded the largest decrease in production (23.19%), as it manufactured 45,850 passenger cars and CDK kits. During the above-mentioned period, only Opel (factory in Gliwice) increased its production (by 64.66%), putting out 158,700 passenger cars. The following models had the highest number of cars manufactured in Poland in 2010: Fiat Panda (more than 236,700), Fiat 500 (185,100), and Opel Astra IV (120,800). An upturn in business conditions can be seen in the growing production of delivery vehicles - 87,986 light commercial vehicles were manufactured in 2010 (ca. 30% more than in 2009); most of them (96.69%, 85,073 units) were exported. In 2009 96.99 per

cent of light commercial vehicles were sold to foreign customers, thus this percentage remained unchanged. Volkswagen, with its production at a level of 77,178 LVCs, is the biggest manufacture of this type of vehicles in Poland. VW Caddy is the most popular LCV model manufactured in the Polish factories (in 2010 its production was at a level of 68,390 units). In 2010 a new manufacturer appeared, DZT Tymińscy; this company purchased the right to produce all-terrain vehicles Honker and light commercial vehicles Lublin14.

Figure 6. Car production in Poland [in thousand units]

167

Source: Polish Automotive Industry Association, “Report on the automotive industry, 2011”, KPMG, Baker & McKenzie, Warsaw 2011.

The second important subsector of the automotive industry in Poland is the manufacture of engines and car parts, used primarily in the process of vehicle production in other factories (the factories of Toyota and Volkswagen). A numerous group of Polish car parts subsuppliers work for the needs of foreign firms, including for example Inter Groclin, a company that manufactures car seats and upholstery for, among others, BMW, Mitsubishi, Audi, VW, Opel, Volvo, Suzuki, Mercedes, and Porsche. The tyre industry is also well- developed. In Olsztyn Michelin, Kormoran, and Kleber tyres are manufactured, in Dębica tyre brands such as Goodyear, Dunlop or Fulda, while the Japanese company Bridgestone is investing in four new plants in Poland (Poznań, Wolsztyn, Żarów, Stargard Szczeciński)15.

14 Polish Automotive Industry Association, “Report on the automotive industry, 2011”, KPMG, Baker & McKenzie, Warsaw 2011. 15 Bulioski J., “The automotive industry in Poland”, Polish Information and Foreign Investment Agency, Warsaw, 2010.

Sold production of the Polish auto factories in 2009 accounted for 9.7% of total sales of industry in Poland, which was a much better result compared to the steel-making, oil, plastics, and chemical industries. Auto exports in 2009 were €15.7 billion, which accounted for 16% of total Polish exports and for as much as 21.8% of Polish manufacturing exports1. Most exports are sent to the EU where the main trading partners for Polish exports are countries such as Germany (€4.8 billion - 30%) and Italy (€2.9 billion - 18%), thus the countries with the highest investments in this sector. Automotive exports primarily comprise car sales (€6.7 billion - 43% of total exports), but also the export of car parts and accessories (€4.7 billion - 30% of exports) as well as the export of compression-ignition engines (€1.8 billion - 12% of exports).

In addition to the above-described market of finished goods, the area of automotive services, provided by both the car concerns and ―independent‖ garages, is a major part of the Polish auto industry. They include about 600 car parts wholesalers, who provide 10,500 jobs and generate revenues of more than PLN 9.6 billion, as well as 18,500 garages employing 86,000 people and generating revenues of PLN 19 billion a year (2009).

The advantage of the Polish automotive industry is its large and relatively well-skilled labour force. Labour costs in Poland are relatively low and they are about a third of labour costs in Germany or France. By way of comparison, one hour of work in Poland costs about $11, 168 which is an amount lower than in the Czech Republic (nearly $14) but, at the same time, higher than in Hungary or Slovakia (more than $9), Romania (ca. $6), or in Ukraine (less than $3). In the first quarter of 2010, an increase in job offers in the automotive sector in Poland by around 15% was recorded, compared to the previous year, and this trend still continues. In 2009 persons employed in the automotive industry accounted for 5.6% of total employment in Polish manufacturing, and the value of sold production per employee was nearly twice higher than the average for total manufacturing (PLN 610,200)16. In 2009 over 1.9 million persons studied in Poland, including 322,000 students of technical universities, and the number of students in relation to the total population (5.5%) was higher than in Hungary, in the Czech Republic, and in Slovakia (3.6%, 3.4%, and 4.1%, respectively). Poland does not base its competitiveness only on cheap and large labour force. In selecting a particular location for their investment, automotive concerns also take into account other external factors, including support of the state in the investment process, the level of

16 Kosiba J., Lasota S., Markiewicz- Patkowska J., Sebastian Z., Wągiel J., “Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia”, Lower Silesian Chamber of Commerce, and Mirosław Wróbel Sp. z o. o. Authorised Mercedes-Benz Dealer, Wrocław, 2010.

bureaucracy, tax burdens, availability of local suppliers of car parts and components, land prices, or the quality of transport infrastructure.

The development of the automotive sector in Poland in the next years will depend on whether the auto companies will be able to keep the existing factories in operation – mainly the factory of Fiat Auto Poland in Tychy which has existed since 1992 (in 1921, the first attempts have been undertaken Fiat's production activities in Poland) and the factory of General Motors Manufacturing Poland in Gliwice which has been in operation since 1998. This development will also depend on whether Poland will become a competitive country compared to other countries seeking new automotive investments. The Polish Information and Foreign Investment Agency (PAIiIZ) is currently working on several dozen projects from the auto sector which, in effect, can attract investments of foreign car components manufacturers, including Henscheln Engineering Automotive, Brembo, Bridgstone, Gedia Poland, Delphi, and General Motors.

13.2 The automotive sector in Lower Silesia Lower Silesian Voivodeship (region) is characterised by high industrialisation compared to the other regions of the country. In 2009 the value of sold industrial production in this region was PLN 78,902.3 million. The share of the Lower Silesian region in the generation of 169 national GDP in 2008 was 8.1%. Furthermore, this region is characterised by great traditions associated with the automotive industry, thanks to which it has a chance to become a significant Central European automotive cluster.

In 1952 Jelczańskie Zakłady Samochodowe (Jelcz Automotive Plant) in Jelcz - Laskowice, which now manufactures MAN engines and truck chassis for military purposes, started the manufacture of vehicle bodies and vehicle repair services (and continued these activities until 1958), while in the next years the manufacture of buses, passenger cars, and trucks as well as semi-trailers, spare parts and components. Throughout the whole period of its operations (1954 – 2008), the Jelcz-based plant produced a total of about a quarter of million vehicle units. In the 1990‘s, the company Volvo built a truck assembly plant and a bus factory in Wrocław. A world leader in braking systems, WABCO, built a greenfield braking systems factory in Wrocław. For several years now, Volkswagen Motor Polska has manufactured engines in its new factory in Polkowice. In recent years, Toyota Motor Manufacturing Poland has also started the manufacture of gearboxes in Żarów near Wałbrzych.

A characteristic feature of the automotive industry in Lower Silesia is the production of automotive subassemblies and components, and not complete motor vehicles. Most of these companies are branches of multinational automotive corporations (e.g. Volkswagen, Toyota), operating as part of their international supply – chains. Hence, a major part of production from Lower Silesia is export-oriented. However, it should be stressed that an increasingly stronger asset of this region is the local base of suppliers of car components (often with a high level of technological advancement) who manufacture their products for the branches of the multinationals located in the region. This supplier base is a local element of the main supply chain for automotive components. A Wrocław-based company, REC, can be a good example. This is a Polish firm that has based its business on regional human capital; this company is one of the elements of the supply – chain for the automotive industry in Lower Silesia.

Research & Engineering Center Sp. z o.o. (REC), is a Polish local software producer, its core staff originated from a group of managers of the Software Development Centre of Siemens – an international heavyweight in the ICT sector. In 2008 four companies with different business profiles were spun off from Siemens SDC, including REC which is involved in software engineering. This split was designed to make REC independent, and thus to counteract negative consequences related to changes in its ownership structure. REC provides software and engineering services in the nearshore/offshore and onsite areas to corporate customers (80% of orders), as well as it supplies SMEs (20% of orders), mainly from the industries: telecommunications (30%), automotive (30%), others - telematics (telemetry), home appliances, healthcare, logistics, energy, public sector, Internet (40%). For the automotive sector, this company produces software in three technological ranges: 170 AUTOMOTIVE INFOTAINMANET SYSTEMS – multi-media systems installed in cars, DAS SYSTEMS (Driver Assisting Systems), Telematics/M2M (wireless communication in form of Car2Car and Car2Infrastructure). A particularly important aspect of the company‘s activities is its cooperation with universities and scientific institutions. The best examples of such cooperation are17:

 The GRASP project, a cooperation with, among others, the Wrocław University of Technology;  A consortium with Barnemouth University;  A cooperation with Ivonic Industry.

REC Sp. z o.o. conducts its activities under the Innovation and Knowledge Community cluster, which is managed by public authorities. This cooperation gives many benefits to the company. The following are most frequently mentioned:

 contacts with higher education institutions and other firms,  possibility to implement innovation projects,  exchange of information and know-how.

Total employment in the company is about 240 people, including 140 staff based in Wrocław (the other employees are employed in Koszalin, Zielona Góra, Zagreb,

Žilina, and Bratislava). In addition, REC has 7 sales locations: USA (San Francisco), UK (London), Netherlands (Amsterdam), Germany (Ismaning n. Munich), Austria (Vienna), Poland (Warsaw),

17 Cooperation with EIT+ is planned in the future.

Croatia (Zagreb), and Slovakia (Bratislava). REC‘s supply – chain is composed of the following elements:

 Customers: Continental AG, Bosch Automotive, Magnetti Marelli, Harman Becker, Alpine, Johnson Controls - companies that are the main suppliers for car makes such as Volkswagen, BMW, Audi, Fiat, etc.;  Suppliers: these are local micro and small enterprises, e.g. programming firms, firms supplying programming tools;  Links: the customers of the company REC aggregate other suppliers (e.g. suppliers of software components, hardware components, etc.) parallel to us.

The development of the auto industry in the region is promoted by the fact that the main European transport corridors run Lower Silesia, by its modern, diversified, and dynamically developing economy as well as by its active, entrepreneurial, and young community. Thus, the location of a manufacturing facility in Lower Silesia opens a possibility for firms to find relatively cheap labour force and to secure easy transport of their goods to the neighbouring countries. The great activity of foreign investors in this region has resulted in a significant rise in the number of entities active in the automotive sector – a 27% increase during the period 2005 – 200718.

In the automotive sector in Lower Silesia, 21,300 people were employed in 2008, which accounted for 4.9% of regional employment. This result shows the great importance of the sector under investigation for the Lower Silesian labour market and the region‘s economy. Looking at the growth rate in employment (an increase by about 40% in the years 2005 – 2008), a thesis can be put forward that in the future the role of this sector is bound to 171 increase.

13.2.1 Investment attractiveness of Lower Silesia Foreign investments located in the region are the driving force for the Lower Silesian automotive sector. Regional investment attractiveness was the object of research conducted by the Gdańsk Institute for Market Economics (Instytut Badań nad Gospodarką Rynkową)19. In the chapter below, the authors of the present report are largely based on the results of this research, mainly from the point of view of the determination of Lower Silesia‘s position among the other Polish regions.

Creating a good climate in Poland for activities of foreign entities (also including businesses involved in the automotive sector), primarily as a result of the implementation of systemic reforms and by making use of comparative advantages of our country, can be seen in the

18 Lichniak I., Żelazko B., “The labour market in selected sectors of the economy in Lower Silesian Voivodeship in 2008 and its changes in the period 2005-2007”, Warsaw, November 2008. 19 „Investment attractiveness of Poland’s regions and subregions, 2010”, the Gdaosk Institute for Market Economics, Gdaosk 2010.

dynamics of changes associated with the cumulated value of foreign direct investment. In September 2010 it was almost €126 billion. By sector, the following sectors had the highest shares of funds invested in Poland in 2009: food processing (€1711 million), business services (€1644 million), financial intermediation (€1617 million), trade as well as repair (€948 million), electricity, gas and water supply (€856 million), and manufacture of transport equipment (€524 million)20.

Among the Polish voivodeships, a region that stands out in terms of the number of entities with foreign capital registered in the REGON system (National Business Registry System) is Masovian Voivodeship, while Lower Silesian Voivodeship ranks second, with 6,346 companies with foreign capital, which is an outstanding result relative to the other regions with lower positions in this ranking18. In the breakdown by cities, Warsaw (30%) has the largest share of commercial companies with foreign capital, followed by Wrocław (25%), Łódź (21%), and Kraków (19%). However, it is important to notice that among all the cities Wrocław has the lowest share (46%) in the total number of companies with foreign capital within a given region, which is evidence of high dispersion of such companies within the Lower Silesia region21.

The regions of high investment attractiveness, characterised by the most optimal combination of location factors creating the best conditions for business activities of 172 enterprises, include Lower Silesia (ranking second after Silesia) which, as one of the most attractive regions for investment in the country, is distinguished primarily by the high ratings of its activity designed to support investors, transport availability as well as the level of economic and social infrastructure (2010). In addition to social infrastructure, in the other three cases Lower Silesia is a clear leader among all the regions in Poland.

The highly rated transport availability of Lower Silesia results from a high density of its road and railway network as well as from the proximity of the western border, whereas in the case of economic infrastructure the positive assessment of Lower Silesia is a result of the well- developing business support sector and the above-average R&D sector. As far as social infrastructure is concerned, Lower Silesia ranks third and is clearly surpassed by two southern regions – Silesia and Małopolska (Lesser Poland). At the same time, its advantage over the other regions is also very large. The important position of Lower Silesia is

20 Kwiecioski L., Stawicka M., M. Wróblewski M., “Analysis of regional investment attractiveness in the light of modern trends” prepared under the project “Analysis, research, and forecasts for the Lower Silesian Voivodeship Strategy”, December 2010. 21 http://www.stat.gov.pl.

associated with the high intensity of cultural activities, well-developed hotel and restaurant infrastructure as well as the high activity of the local cultural institutions. In terms of market absorption capacity, Lower Silesia is ranked slightly further down (the fourth place after Masovian, Silesian, and Pomeranian Voivodeships), labour resources and costs (the fifth place after Silesian, Małopolska, Wielkopolska (Greater Poland), and Łodź Voivodeships), and in public security (the last but one place in the ranking, which is a result of an above- average crime rate and a low crime detection rate).

The location of manufacturing investments is dependent on factors that determine production costs, mainly including labour resources, transport availability, labour costs, and the level of economic infrastructure development. The subregions located around Wrocław and Wałbrzych are considered to be the Lower Silesian subregions with the highest investment attractiveness for manufacturing activities. Their great importance is associated with their long industrial traditions, the well-developed sector of manufacturing enterprises, the specialist labour market, and good transport availability22. The strong position of these two subregions arises from the dynamic development of their economies (a large number of companies with foreign capital) and from business infrastructure (including a large area in their Special Economic Zones). The region‘s transport availability, including the proximity of the western border and the road network with the motorway A4, also has a significant impact. 173

Investment attractiveness of a particular region, taking into account service activities, is most strongly affected, similarly as in the case of manufacturing activities, by labour costs, transport availability, and the level of business infrastructure development. Furthermore, the level and quality of labour resources as well as the absorption capacity of the institutional market also have a significant effect. Among the subregions of Lower Silesia, the Wrocław subregion is of the greatest importance (sixth place in the country). In this respect, the other subregions of Lower Silesia vary significantly – the Wałbrzych subregion is included in the high investment attractiveness group, the Jelenia Góra subregion is marked by average investment attractiveness, whereas the Legnica – Głogów subregion is a region of the lowest attractiveness.

The level of attracting high technology investments depends on the same factors as in the case of manufacturing and service activities. The level of economic development has an additional effect. In the case of advanced technology activities, Lower Silesia is one of the

22 „Investment attractiveness of Poland’s regions and subregions, 2010”, the Gdaosk Institute for Market Economics, Gdaosk 2010.

highest rated regions in Poland. Two subregions, the Wrocław suregion and the Legnica – Głogów subregion, are ranked high (fifth and tenth places in the country, respectively). The other two (Jelenia Góra and Wałbrzych subregions) are included in the subregions of high investment attractiveness in this respect. R&D infrastructure and personnel as well as the academic community, which is mostly concentrated in the metropolitan subregions, greatly affect advanced technology investments.

The high number of attractive investment offers proposed, among others, by the Wałbrzych Special Economic Zone Invest-Park, is an asset of Lower Silesia. The areas of the highest investment attractiveness for foreign investors can be shown on the basis of the above analysis. Such areas include the city of Wrocław, together with its environs, the areas around Wałbrzych and Jelenia Góra as well as the Legnica – Głogów subregion. Investments of the most important automotive industry manufacturers (they are presented in section 3.2.2.) have been located exactly in these areas of Lower Silesia, with the highest investment attractiveness.

13.2.2 Characteristics of the automotive industry in Lower Silesia based on statistical data 174  The supply side An essential element of the characteristics of the automotive industry in Lower Silesia is an analysis of the importance of this sector for the region‘s whole economy – both in static and dynamic terms. Given the above, Chart 11 presents the values of the Balassa index, which is a measure of concentration of activities in a selected area in relation to a reference area (e.g. the country). The analysis of the above-mentioned index, in both static and dynamic terms, allows us to identify key sectors of the regional economy which show a development trend (the value of the index above 1 and its positive growth rate), at the same time indicating the sectors of lower importance for the development of the economy. Due to the lack of available statistics on the distribution of Gross Value Added (GVA) between particular PKD (Polish Classification of Activities) sections, the value of sold industrial production was used to calculate the above-mentioned index.

Chart 11. The Balassa index for the section: manufacture of transport equipment (NACE 34) in 2004-2009 (sold industrial production)

2 1.95

1.9 1.85

1.8 1.84

1.7 1.64 1.58 1.6

1.5 1.44

1.4 2004 2005 2006 2007 2008 2009

Source: Central Statistical Office of Poland (GUS).

The analysis of the value of the Balassa index shows the relatively high importance of the automotive industry for the economic development of Lower Silesia (this value is distinctly higher than one). Nevertheless, it should be noted that there is an ongoing reduction in the role of this area of business activity in the total value of industrial output in Lower Silesia compared to Poland as a whole. This indicates 175 higher diversification of the sector II structure, largely attributable to the location of many branches of multinational companies involved in the electronics (among others, LG) or electrical machinery industries (among others, Alstom) in the region under consideration.

The reduction of the relatively strong position of the auto industry in Lower Silesia‘s economy finds confirmation in a relatively low growth rate of development of this sector after Poland‘s accession to the European Union (Table 10). It should be noted that there was a relatively stronger slow-down in the increase of the Lower Silesian automotive industry during the period of the global economic crisis (2008-2009) than in the case of the national average and total manufacturing output in this region (Chart 12, 13). This indicates a relatively high level of internationalisation of this manufacturing sector in the region in question, whose production is exported in a major part within the international value added chain. Therefore, an economic downturn in the global markets has an effect on the volume of products manufactured in the region. Another fact worth noting is a relatively mild decline in the growth rate in question between the crisis years 2008 and 2009. It was only 5.7 percentage

points, whereas the average decline for the other regions was in the range of 35 percentage points 23. This seems to result from the relatively high level of slow-down in the output growth rate in Lower Silesia in 2008, when this region recorded the second highest decline in automotive industry production in the country.

Table 10. The growth rate in sold industrial production in the automotive sector for Poland and Polish regions (voivodeships) in 2002 – 2009 [in %] 2002 2003 2004 2005 2006 2007 2008 2009 POLAND 103.4 130.3 155.7 104.4 121.0 114.2 107.4 87.8 LOWER SILESIA 115.2 125.0 119.0 110.6 118.7 117.0 85.9 80.2 KUJAWSKO-POMORSKIE 77.2 96.1 156.5 103.0 132.3 130.3 101.4 58.1 LUBELSKIE 57.6 148.4 83.0 113.2 129.1 137.1 129.9 89.4 LUBUSKIE 105.2 171.8 232.3 96.3 120.9 116.9 107.8 103.5 ŁÓDZKIE 101.0 101.3 121.7 145.8 134.9 122.2 92.8 65.3 MAŁOPOLSKIE 172.1 215.3 351.4 124.1 140.3 126.7 155.0 66.2 MAZOWIECKIE 93.9 114.2 113.5 113.9 132.7 130.9 127.0 48.9 OPOLSKIE 102.9 177.6 139.4 98.1 118.8 114.4 119.2 107.3 PODKARPACKIE 112.8 114.3 112.0 96.4 132.7 120.2 92.3 70.6 PODLASKIE 101.4 60.6 88.0 242.5 108.5 140.0 307.0 0.0 POMORSKIE 68.9 110.9 125.9 116.2 109.3 107.1 117.3 78.9 ŚLĄSKIE 96.0 130.2 160.8 101.5 121.6 117.5 115.6 91.6 ŚWIĘTOKRZYSKIE 79.1 53.6 130.8 100.5 101.8 127.2 120.0 59.9 WARMIŃSKO- 0.0 170.6 95.0 101.6 99.1 121.5 84.8 40.5 WIELKOPOLSKIEMAZURSKIE 107.7 145.0 204.5 103.7 103.4 93.4 103.4 86.4 ZACHODNIOPOMORSKIE 89.9 99.6 116.8 94.7 105.0 140.4 0.0 65.6 176 Source: BDL & Statistical Yearbooks of the Republic of Poland.

23 Podlasie and West Pomeranian Voivodeships have been neglected, since there is no data for these two regions.

Chart 12. The growth rate in sold industrial production in the automotive sector for Poland and Lower Silesia in 2002 – 2009 [in %]

160 155.7 150

140 130.3 130 121.0 115.2 117.0 120 125.0 119.0 110.6 118.7 110 114.2 107.4 100 103.4 104.4 87.8 90 85.9 80.2 80 2002 2003 2004 2005 2006 2007 2008 2009

POLAND LOWER SILESIA

Source: Central Statistical Office of Poland (GUS).

Chart 13. The growth rate in total industrial production in Lower Silesia in 2002-2009 (previous year=100) 125

120 119.0 115.4 177

115 111.6 111.5

110 110.5 106.4 105

100 100.4 95.4 95 2002 2003 2004 2005 2006 2007 2008 2009

Source: Central Statistical Office of Poland (GUS).

In order to supplement the analysis of manufacturing production in the automotive sector in Lower Silesia, it is worth focusing on its structure considered from the point of view of enterprise size. As shown in Table 11, in the case of production in the automotive sector in Lower Silesia, a clear dominance of large economic entities (more than 1000 employees) can be seen. In spite of a decrease in the share of large firms operating in the auto industry relative to the year 2007 (the earliest available data), their percentage remains nearly 10 percentage points higher than it is in the case of total industrial output in the region in question. Moreover, enterprises

employing 500 - 999 people are of relatively great importance in the automotive industry. The above confirms the fact that large firms established as a result of FDI inflows from multinationals such as, e.g., Volkswagen, Volvo, or Toyota play an extremely important role in the development of the sector under study in Lower Silesia. In 2009 small and medium enterprises had only a 7.9% share in automotive output, which confirms the global trend towards the concentration of particular elements of the value creation chain (in particular, the manufacture of individual components) in various locations in order to generate economies of scale that allow firms to increase their productivity and to reduce fixed costs, thus contributing to increased competitiveness of a particular firm at the global scale. The share of business entities operating in Lower Silesia‘s automotive industry in the number of entities of this sector for Poland as a whole (8.2% Lower Silesia, 91.8% Poland) is very close to the corresponding percentage for the total number of business entities (8.5% Lower Silesia, 91.5% Poland). Thus, it can be concluded that, in terms of the number of enterprises engaged in the automotive sector, the region in question does not stand out against the whole country, although the volume of products manufactured in this sector in Lower Silesia is of relatively great importance in the development of the entire region, which is confirmed by the above-cited Balassa index. 178 Table 11. Characteristics of total industrial production sold and industrial production sold in the automotive sector in terms of the number of people employed in enterprises in Lower Silesia – the years 2007 and 2009 (%) 1000 50 and Year 50-249 250-499 500-999 and less more 2007 7.7 18.1 12.8 12.9 48.6 Lower Silesia – total industry 2009 7.7 18.2 12.2 16.0 45.9 2007 0.5 4.3 8.6 7.2 79.4 Lower Silesia – automotive industry 2009 0.9 7.0 18.0 19.7 54.4 Source: Central Statistical Office of Poland (GUS).

The volume of investments in this sector is an important aspect of the analysis of the automotive market. The main goal of investment expenditure, and hence the main reason for the investment process, is to replace and increase the volume of capital, and thereby to increase the amount of goods and services produced as well as to streamline the manufacturing process in qualitative terms. Investment expenditure creates a chance to improve labour and capital productivity, which is an intensive factor of production contrary to extensive factors related to the increase in the numbers employed or in the volume of capital goods. In turn, higher productivity

implies, assuming a low growth rate in wages, an improvement in unit labour costs and thus improved international competitiveness of firms operating in this sector. Taking into consideration the importance of investments for the future development of this sector, the u-chart below presents gross fixed capital formation in Lower Silesia compared to the whole country and its growth rate.

Chart 14. Gross fixed capital formation in Lower Silesia and in Poland in 2002-2007 [in PLN ‘000]

5 000 000 4 500 000 4 000 000 3 500 000 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 179 000 000 2002 2003 2004 2005 2006 2007

POLAND LOWER SILESIA

Source: Central Statistical Office of Poland (GUS).

Chart 15 The growth rate of gross fixed capital formation in Lower Silesia and in Poland in 2003-2007 (%) 80 69.4 60 56.8 63.2 40 20 15.6 -0.7 0 9.8 -15.5 -20 2003 2004 2005 2006 2007 -12.1 -5.3 -40 -60 -54.8 POLAND LOWER SILESIA

Source: Central Statistical Office of Poland (GUS).

In analysing the volume of investment in the automotive sector, it can be noticed that investments in Lower Silesia make up a large part of national capital expenditure. In the period under study, limited by data availability, investments made in Lower Silesia accounted for, on average, 25% of annual capital expenditure invested in the automotive sector in Poland. This should be treated as a good signal for the further development of the sector under consideration in Lower Silesia which indicates the strong determination of enterprises to strengthen their competitive position at the global scale.24 It is worth noting that the growth rate in capital expenditure in the region (Chart 15) shows high fluctuations (also relative to Poland as a whole), though we have to do here with too short time series to be able to formulate definite conclusions on this basis.

In conclusion, it should be taken into account that the recession in the global economy in the years 2008 and 2009 as well as the economic perturbations related to the debt crisis that is taking place now across the EU may contribute to deep structural changes in the economy of individual regions, including Lower Silesia, resulting in a reduction of the role and nature of the existing main determinants of development. In connection with the fact that we lack adequate data and reliable forecasts in this respect, we should exercise utmost caution in the preparation of medium-term predictions for the development of the automotive sector in Lower 180 Silesia.

 The labour market and wages In terms of numbers employed, Lower Silesia is among the first five regions in Poland. 9,768,013 people were employed in Poland in 2009, which gives ca. 82,000 persons more compared to the previous year. By PKD (Polish Classification of Activities) sections, in 2009 the highest employment was in Section C (32.68% of total employment). In the breakdown by region, Lower Silesia is the leader in Section C in 2009. Lower Silesian Voivodeship ranks fourth in terms of employment in the whole country (180,163 people employed).

24 Available data for manufacturing production and employment allow us to calculate labour productivity in the automotive sector in Lower Silesia in relation to this indicator for Poland as a whole. For the years 2004, 2007, and 2008, it has the following values, respectively: 108.9%; 98.7%; and 99.1%. Thus, we can notice a decline in productivity in the automotive sector after Poland’s accession to the European Union, but we should keep in mind that these were years of prosperity in which people with lower qualifications started to find employment due to a shortage of labour force. Furthermore, it is worth noting that the productivity in question oscillates all the time around the national average.

In Poland 149,075 people are employed in NACE 34, which accounts for 6.13% of total employment. It can be seen in Chart 16 that the number of people employed in manufacturing in Poland increases every year; this number rose by 69,583 people between 2002 and 2008. Silesian Voivodeship is a leading region in terms of this division, since it has the highest number of people employed in it (43,372). Lower Silesia ranks second (21,994 persons). Over the last seven years, the highest increase in numbers employed was in the period 2004 - 2005, whereas in the years 2007 – 2008 there was a fall in employment.

Chart 16 Employment in NACE 34 in 2002 – 2008 in Poland and in Lower Silesia [number of people]

160,000 149,075 138,458 140,000 122,322 120,000 108,165 99,813 100,000 86,461 79,492 80,000 60,000 40,000 22,648 21,994 17,819 20,267 20,000 10,310 12,166 14,657 0 181 2002 2003 2004 2005 2006 2007 2008

POLAND LOWER SILESIA

Source: Authors‟ calculations based on GUS data.

In 2009 the average monthly gross wage in the national economy in Poland was PLN 3,101.74. Masovian Voivodeship ranks first in the country, with the highest average monthly gross wage (PLN 3,915.46), followed by Silesian and Lower Silesian Voivodeships. In 2009 in Poland the average monthly gross wage in manufacturing was PLN 3,094.41. By region, Silesian Voivodeship was characterized by the highest value of this indicator (PLN 3,873.98). Lower Silesia was in the first three regions in these terms. In 2009 the monthly gross wage in manufacturing in Lower Silesia in public institutions was PLN 4,095.02 and it was higher by 13.45% than the average gross wage for the whole region and by 24.44% than the average gross wage for the country. Over a period of eight years (2002 – 2009), the average gross wage in Lower Silesia increased by 34.07% (Chart 17).

Chart 17 The average monthly gross wage in manufacturing in Lower Silesia [PLN] 4000 3544.36 3368.84 3500 3148.2 2871.9 3000 2705.6 2566.13 2573.87 2500 2336.87

2000

1500

1000

500

0 2002 2003 2004 2005 2006 2007 2008 2009 Source: Authors‟ calculations based on GUS data.

Total wages paid out in Poland in 2008 in NACE 34 were PLN 5,843,300,000. Compared to 2002, this value increased by 64.80%. The highest increase was recorded in the period 2005 - 2006 (by 19.86%). The highest wages in NACE 34 in 2008 were in Silesia (PLN 1,797,177,000). The next region was Wielkopolska (Greater Poland) (PLN 990,928,000), followed by Lower Silesia (PLN 923,044,000). The value of wages in NACE 34 in the years 2002 - 2008 continually increased. The 182 highest increase was recorded in the period 2004 - 2005 (by 22.85 %).

Chart 18 Wages and salaries in NACE 34 in 2002 – 2008 in Poland and in Lower Silesia [PLN ‘000] 7,000,000

5,843,300 6,000,000

5,000,000 4,756,621

4,000,000 3,812,012 3,170,868 2,869,695 3,000,000 2,358,321 2,056,735 2,000,000 923,044 871,444 1,000,000 539,395 699,173 278,150 340,873 439,502 0 2002 2003 2004 2005 2006 2007 2008

POLAND LOWER SILESIA

Source: Authors‟ calculations based on GUS data.

 Financial analysis Business entities conducting activities within Lower Silesia recorded a gross financial result of PLN 9,691,758,000 in 2009, including 9.3% generated by the public sector and 90.7% by the private sector. Gross financial result generated by the sector Manufacture of motor vehicles, trailers and semi-trailers, excluding motorcycles, was PLN 108,911,000 (which accounted for 1.12% of total gross financial result generated by business entities in Lower Silesia). In 2009 the value of total gross financial result in the region in question increased by 17.4% compared to 2008. But a reverse situation was observed in the case of the automotive sector where the value of gross financial result in 2009 decreased by 2.9% compared to the previous year (the net financial result was reduced by 14.3%). This confirms a relatively high level of internationalisation of the automotive sector in Lower Silesia, which contributes to its higher ―sensitivity‖ to negative consequences of the global economic crisis.

Table 12 Gross and net financial result in entities in Lower Silesia and in entities belonging to Section C Division 29 in Lower Silesia in the years 2008 and 2009 Gross Net Gross Net financial financial financial financial Specification result result result result 2008 2008 2009 2009 183 in PLN „000 Lower Silesia 8007356 6362006 9691758 8046391 Manufacture of motor vehicles, trailers 112016 89762 108911 76952 and semi-trailers, excluding motorcycles Source: Authors‟ calculations based on data obtained from the Statistical Office in Wrocław

Table 13 Gross profit, net profit, gross loss, net loss in entities in Lower Silesia and in entities belonging to Section C Division 29 in Lower Silesia in the years 2008 and 2009 Gross Gross Net Net Gross Gross Net Net Specificatio profit loss profit loss profit loss profit loss n 2008 2008 2008 2008 2009 2009 2009 2009 in PLN „000 Lower 1066687 265952 896603 260403 1119279 150104 955530 150891 Silesia 6 0 8 2 8 0 2 1 Manufacture of motor vehicles, trailers and 387357 275341 366198 276436 326906 217995 289617 212665 semi-trailers, excluding motorcycles Source: Authors‘ calculations based on data obtained from the Statistical Office in Wrocław.

 Profitability of the automotive sector Profitability ratios are divided into three basic groups: rate of return on sales, rate of return on assets, and rate of return on equity. In financial analysis, return on equity (ROE) is of special significance. This ratio describes the relation between generated net profit and shareholders‘ equity. It shows how many groszys of net profit are generated by each PLN of shareholders‘ equity. In other words, it allows the effectiveness of shareholders‘ equity to be determined. In Lower Silesia the value of ROE for the automotive industry in 2009 was at a level of 2.6% and it was 0.7 percentage points lower than in 2008 as a result of the crisis in the global economy. It should also be noted that in the two years analysed the value of ROE for the automotive industry was several times lower than the value of the corresponding indicator for the whole economy in Lower Silesia. This is attributable, among others, to relatively high capital-intensity of the automotive industry and relatively high profits generated in the services sectors, which do not require high fixed capital investment.

Return on capital employed is determined by factors such as: operational effectiveness expressed by return on sales, effectiveness of assets, and financial leverage, that is, utilization of external capital in order to increase profit per equity unit. 184

Figure 7 Pyramid of profitability

ROE

ROA equity multiplier

ROS asset turnover ratio

Source: Authors‟ diagram.

Considering the change in the value of ROE between the years 2008 and 2009 through the prism of other profitability measures, it should be noted that the decrease in ROE was affected by factors such as: a reduction in the rate of return on assets (ROA) indicating the level of effectiveness of fixed assets (on the other hand, the

change in ROA was affected by the following: the decreasing asset turnover ratio, which indicates what value of sales is generated per one PLN of assets employed and defines the entity‘s ability to generate sales revenue, and the increase in the rate of return on net sales informing to a certain degree about the relation between sales and generated profit). A small decrease in the equity multiplier, indicating the reduction in financial leverage in the sector under consideration, was another factor, in addition to ROA, determining the change in ROE in 2009.

Table 14 Financial ratios: return on equity, return on assets, gross return on sales, in entities in Lower Silesia and in entities belonging to Section C Division 29 in Lower Silesia in the years 2008 and 2009 2008 2009 Equity Asset Equity Asset ROE ROA ROS multipl turnove ROE ROA ROS multipl turnov ier r ratio ier er ratio Lower 11.00 9.10% 4.60% 5.10% 1.98 0.90 5.60% 5.90% 1.96 0.95 Silesia % Manufacture of motor vehicles, trailers and 3.30% 1.40% 0.90% 2.35 1.56 2.60% 1.10% 1.00% 2.36 1.10 semi- trailers, excluding motorcycles Source: Authors‟ calculations based on data obtained from the Statistical Office in Wrocław. 185

 Liquidity ratios The liquidity ratios can provide information on the firm‘s ability to pay its future short- term liabilities and, in this way, to make an evaluation of a given industry in terms of its liquidity.

 The current ratio (level III) In 2009 the current ratios (level III), which is the ratio of current assets to current liabilities, reached a level of 144.4% for all enterprises operating in Lower Silesia, suggesting that the enterprises continue to attach importance to financial security. The value of this ratio slightly decreased by 0.4 % compared to the previous year. In the section Manufacture of motor vehicles, trailers and semi- trailers, excluding motorcycles, in 2009 the current ratio reached a value slightly lower than for all enterprises, though it was also relatively high – 129.8%. The value of this ratio increased by 3.2 % compared to the previous year. This indicates relatively stronger efforts of the automotive sector in Lower Silesia to

strengthen financial security by increasing their potential ability to pay liabilities incurred in a timely manner.

 The quick ratio (level II) The quick ratio allows the quick determination of the degree of liquidity, that is, how easily assets can be turned into cash. To calculate this ratio, we need to know the value of current assets, from which the least liquid assets are excluded, and then it is divided by the value of current liabilities. For all businesses in Lower Silesia, the value of the ratio in question oscillated around 103.7% in 2009 and it rose by 1.7 % compared to the previous year. In 2009 the quick ratio in the automotive sector was 100.6% and by 0.9 % higher than in the previous year. Such a situation means that the enterprises involved in the automotive industry were able to cover with liquid financial assets their current liabilities, i.e. trade payables and short-term loans and borrowings with maturity of less than one year as well as liabilities from short-term debt securities.

 The cash ratio (level I) On the basis of the analysis of the cash ratio, one can draw a conclusion whether enterprises are solvent in very short time. It is calculated as a ratio of cash and liquid securities to current liabilities. In the period in question, i.e. 2009, 186 the value of this ratio for the enterprises operating in Lower Silesia was 36.4%, which means that they were able to meet their current liabilities in such percentage using their cash and cash equivalents. In the previous year, this ratio was lower by 0.70%. The performed analysis of the automotive market in Lower Silesia showed an increase in the cash ratio by 3.1% in 2009 relative to the previous year. In practice, first level liquidity is very low, since excessive liquidity has a negative effect on the level of profitability.

Table 15 Level I, II and III liquidity ratios in entities in Lower Silesia and in entities belonging to Section C Division 29 in Lower Silesia in the years 2008 and 2009 Liquidity ratios calculated relative to current liabilities (including special funds) Specification Level I Level II Level III Lower Silesia 36.40 102.20 144.40 Manufacture of motor vehicles, trailers and semi- 22.40 89.00 129.80 trailers, excluding motorcycles Source: Authors‟ calculations based on data obtained from the Statistical Office in Wrocław.

13.3 The biggest manufacturers in the automotive sector in Lower Silesia

In 2009 more than 200 enterprises operated in the automotive sector, including 54 companies which were only involved in the manufacture of motor vehicles, trailers, and semi-trailers (excluding motorcycles). The spatial distribution of the most important auto manufacturers is shown in Figure 8.

Figure 8 The most important automotive industry manufacturers in Lower Silesia

187

Source: Authors‟ own research.

The characteristics of the most important world motor vehicles and parts manufacturers operating in Lower Silesia25:

VOLVO Polska SP. Z O.O. Place of investment: Wrocław Country of origin: Sweden Employment: 2637 people Total investment value: €90 million

The dynamic development of this company started in 1992 when a Volvo representative office was opened in this region. During the first years of its operation (1993-1994), the investor cooperated with the Jelcz Automotive Plant, starting the manufacture of trucks and buses in Jelcz as Volvo Truck Poland Sp. z o.o. In 1995 a truck factory in Wrocław launched its operations and a year later also a bus factory. Since 1998, the Wrocław-based factory has operated as the European largest Volvo bus manufacture centre, the largest Volvo bus factory in Europe.

GRUPA BOSCH Place of investment: Mirków near Wrocław 188 Country of origin: Germany Employment: 500 people

The Bosch Group in Poland comprises the following companies: Bosch Siemens Sprzęt Gospodarstwa Domowego Sp. z o.o., Bosch Rexroth Sp. z o.o., Buderus Technika Grzewcza Sp. z o. o., and Robert Bosch Sp. z o.o., within which a specialist unit operates – Układy Hamulcowe (Braking Systems) – a branch in Mirków near Wrocław; this unit manufacturers hydraulic components for braking systems, such as: disc brake calipers, brake pumps, brake cylinders, disc brakes, pressure regulators, anti-block systems, power brakes, clutch pumps, clutch cylinders as well as gearbox parts for Fiat. Brake components manufactured in the Bosch plant - Układy Hamulcowe (Braking Systems) – are supplied in Poland mainly to auto concerns such as Fiat, Peugeot, and General Motors.

25 Economic Development Office, Business Support Department, “Foreign Investment in Wrocław”, Wrocław, 2008.

WABCO POLSKA SP. Z O.O. Place of investment: Wrocław Country of origin: USA Employment: 1700 people Total investment value: €75 million

WABCO POLSKA Sp. z o.o. is owned by WABCO Vehicle Control Systems, a corporation belonging to American Standard Companies, a leading manufacturer of pneumatic braking systems, electronic control systems as well as other systems and components for trucks, trailers, buses, tractors, and commercial vehicles. The company WABCO launched its operations in Poland in 1954 in the mining and shipbuilding industries. Ten years later, WABCO started to supply products to the Polish car industry. In 1999 the manufacture of vehicle safety and control systems was launched in Długołęka, but in 2001 the company was moved to Wrocław. Its production is exported mainly to Europe and the USA.

ETO MAGNETIC SP. Z O.O. Place of investment: Wrocław Country of origin: Germany Employment: 200 people 189 Total investment value: €40 million

The German parent company is a leading manufacturer of solenoid valves and electromagnetic sensors used in motor vehicles of different makes. The plant in Wrocław, which specialises in the manufacture of electromagnets for vehicle and machine safety systems, started manufacturing activities in 2001. Production is sent to car parts manufacturers, e.g. to the companies Bosch or WABCO.

FAURECIA Place of investment: Jelcz-Laskowice, Wałbrzych, Legnica Country of origin: France Employment (together with planned employment): 300 people Estimated total investment value: €16 million

In May 2005 this company, which is Europe‘s second largest car equipment manufacturer and one of the world leaders in the manufacture of vehicle parts, started the construction of a manufacturing facility in the Wałbrzych Special Economic Zone – the subzone in Jelcz-

Laskowice (26 km away from Wrocław). Production was launched in the middle of 2006. The plant specialises in the manufacture of car seat components made of polyurethane sponge (seats and backrests). The other 4 plants in Lower Silesia are located in Wałbrzych and Legnica.

GKN DRIVELINE POLSKA Place of investment: Oleśnica Country of origin: United Kingdom Employment: 599 people

GKN Driveline is a company involved in the automotive and aviation industries. Its Polish representative office was set up in 1996 as part of GKN Driveline. At the beginning, the company operated in Twardogóra on the land leased from Fiat. In 1998 the company‘s manufacturing facility and offices were moved to Oleśnica (31 km away from Wrocław). The plant supplies parts to, among others, Toyota Motor Manufacturing Poland. GKN Driveline products are sold mainly in European markets (over 60% of total sales).

TOYOTA MOTOR INDUSTRIES POLAND SP. Z O.O. Place of investment: Wałbrzych, Jelcz-Laskowice 190 Country of origin: Japan Employment: 2607 people Estimated total investment value: €798 million

The factory of Toyota Motor Manufacturing Poland in Wałbrzych, manufacturing petrol engines as well as manual and semi-automatic gearboxes for Toyota cars assembled in Europe, was set up in 2002. In terms of the number of components manufactured, the Wałbrzych-based plant is now the world‘s second largest manufacturing base for Toyota components outside Japan. The investment value is €540 million, whereas employment in the factory is 1815 people.

The factory of Toyota Motor Industries Poland in Jelcz-Laskowice was built in October 2002 within the area of the Wałbrzych Special Economic Zone (the subzone Jelcz-Laskowice), and it started production in March 2005. Currently, the Jelcz-based plant manufactures 180,000 2.2 and 2.0 litre compression-ignition engines per year for Toyota models Avensis, Auris, Verso, and Corolla. In the case of this plant, the investment value is €258 million, and employment in the factory is 792 people.

Volkswagen Motor Polska Sp. z o.o. Place of investment: Polkowice Country of origin: Germany Employment: 1 137 people

Since 1999, the factory in Polkowice has manufactured compression-ignition engines of the most modern construction (2,400 Diesel engines per day).

Autoliv Poland Sp. z o.o. Place of investment: Oława, Jelcz – Laskowice, Długołęka Country of origin: Sweden Employment: 2 240 people

The company is engaged in the manufacture of airbags and airbag modules, components for safety belts, safety belts, vehicle safety systems (Oława and Jelcz – Laskowice). The third factory, opened in Mirków, manufacturers springs for safety belts.

Sitech Sp. z o.o. 191 Place of investment: Polkowice Country of origin: Germany Employment: 1 423 people

The company Sitech specialises in the manufacture of steel frames for car seats within the Volkswagen Group. It was established in 1998 in Polkowice in the Legnica Special Economic Zone. The Polkowice-based plant manufactures seats for some car models of the following car makes: Volkswagen, Audi, Skoda, Seat, and Porsche. Production involves the whole process of finished product manufacture. The assembly line is divided into four manufacturing sections and comprises initial and final assembly of backrests as well as initial and final assembly of seats.

Ronal Sp. z o.o. Place of investment: Wałbrzych, Jelcz - Laskowice Country of origin: Poland

The concern RONAL was set up in 1969 and belongs to the world pioneers in the alloy wheel market. The company manufacturers 4.2 million of light alloy wheels. Initially, the factory in Wałbrzych, in operation since 1997, accounted for about 40% of all production. Subsequently, a major part of this company‘s manufacturing activities were moved to a facility in Jelcz-Laskowice, where production started in 2002.

Grupo Antolin Place of investment: Strzelin Country of origin: Spain Employment: ok. 250 people

The Spanish investor is involved in the manufacture of interior automotive components for various makes. The Strzelin-based factory manufactures, among others: sun visors, headliners, and noise-reducing components, which are then installed in cars produced by car markers such as Volkswagen and BMW.

Metzeler Automotive Profile Systems Polska Sp. z o.o. Place of investment: Wałbrzych Country of origin: Germany 192

The company established in 1997 is a firm with world-wide operations, a leader in the manufacture of automotive sealing systems, including automotive door and window seals. The largest plant of the company Metzeler in Poland is within the Dierżowniów area of the Wałbrzych Special Economic Zone.

NSK Steering Systems Europe (Polska) Sp. z o.o. Place of investment: Wałbrzych Country of origin: Japan Estimated total investment value: ok. €50 million

The factory of NSK Steering Systems Europe (Poland), opened in 2005 in Wałbrzych, is a second factory of this concern in Poland (in addition to the one in Kielce), which is engaged in the manufacture of steering gears for passenger cars.

Takata-Petri Parts Polska Sp. z o.o. Place of investment: Wałbrzych

Takata-Petri Parts is a multinational corporation that supplies safety systems and vehicle interior systems to the automotive industry. Takata-Petri Parts Polska launched production in Krzeszów at the end of 1995. Initially, the plant was engaged in covering steering wheels with leather, injecting foam into car frames as well as in the manufacture and installation of airbags. In 2002 the company focused only on the manufacture of seatbelts for car makers such as Peugeot, Citroen, and Nissan.

Yagi Poland Factory Sp. z o.o. Place of investment: Żarów Country of origin: Japan Employment: 75 people

Yagi Poland Factory Sp.z o.o. is a Japanese firm involved in the manufacture of parts and accessories for motor vehicles and their engines. It launched operations in 2003 by producing parts and accessories for the automotive industry, among others: bearings, hubs, components for air-conditioning clutches. Strategic customers are from England and France. 193

Industrialesud SpA Place of investment: Jawor Country of origin: Italy

Industrialesud SpA belongs to the world leaders in design, manufacture and delivery of vehicle interior systems, with special focus on headliners used for car interior roof lining. The company has a structure that ensures the international participation in the development of the automotive industry. Industrialesud cooperates with and supplies the most important automotive firms under their projects.

Vorwerk Dichtungssyteme Polska Sp. z o.o. Place of investment: Komorniki near Środa Śląska Country of origin: Germany Employment: 230 people Estimated total investment value: ok. €5 million

The core business of Vorwerk Dichtungssyteme is to manufacture and supply products such as EPDM sealing components for the automotive industry, seals for home appliances, and seals used in the construction industry. In 2006 a manufacturing facility was opened in a 2.3 ha plot of land in Komorniki near Środa Śląska where elastomers and sealing systems for vehicle bodies are produced. This firm cooperates with the world‘s automotive manufacturers, Mercedes, Audi, Volkswagen, and Opel.

Gates Polska Sp. z o.o. Place of investment: Legnica Country of origin: USA Employment: 400 people Estimated total investment value: ok. €5 million

Gates Power Transmission Europe B.V.B.A. is the European head office of the multinational company Gates Corporation, one of the market leaders in the manufacture of advanced technology rubber belts and hoses that are used in industry, hydraulics, agriculture, and the automotive industry. Gates Polska started production in 2001. Each month, the firm manufactures over 1 million belts: timing belts, multi-ribbed belts, synchronous belts, and 194 rubber mixtures.

Sanden Manufacturing Poland Sp. z o.o. Place of investment: Polkowice Country of origin: Japan Employment: 400 people

Sanden Manufacturing Poland Sp. z o.o. is a company that manufactures car air- conditioning compressors. It was established in 2004 and belongs to the multinational corporation Sanden which now has a 25% share in the world market of car air-conditioning compressors. Mass production of compressors started in October 2005. The 26000 m2 area of the plant allows the manufacture of more than 1.5 million compressors per year.

13.3.1 Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia – opinions of manufacturers and entrepreneurs

Currently, the labour market for technical school graduates sets high requirements, resulting from the dynamic development of automotive technology and from the imperfections of the system of education in this area. Therefore, in order to educate well-trained personnel that would have sufficient knowledge and skills, efforts should be made, in the first place, to create a system of education based on a dialogue between employers, schools, and students. Moreover, development opportunities in the automotive industry are associated not only with one or two job positions. There are many jobs that require proper knowledge and organisational, commercial, IT talent, or talent in the area of diagnostics of complicated electronic systems but, at the same time, it is difficult to foresee what new professions will be necessary in the next several decades.

Analyses and surveys conducted by a team of the Lower Silesian Chamber of Commerce and the company Mercedes – Benz – Mirosław Wróbel26 allowed one to diagnose the greatest needs of manufacturers and entrepreneurs, including those who are the last elements of the supply chain of the automotive industry in Lower Silesia (car garages and 195 showrooms).

 Manufacturing enterprises Among others, selected manufacturing companies operating in the region participated in the survey; these firms are involved, inter alia, in the manufacture of brake valves, electronic braking systems, or car wheels, and their work force is several thousand people. Two out of the five enterprises surveyed indicated the need to increase employment within the next several years, in particular in jobs such as production operator, production technologist, and mechanic. A part of these firms think that an essential element of the recruitment process is to hire a new employee. However, it is much more important whether such a person has appropriate vocational skills and experience than whether he has education in a given area. In the process of training specialists and professionals, for whom there is a great demand in the auto industry, it is necessary to engage employers in the process of developing employee teaching and training programmes. Such cooperation was

26 Kosiba J., Lasota S., Markiewicz- Patkowska J., Sebastian Z., Wągiel J., “Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia”, Lower Silesian Chamber of Commerce, and Mirosław Wróbel Sp. z o. o. Authorised Mercedes-Benz Dealer, Wrocław, 2010.

established in the case of only one of these enterprises. Practice, which is an important stage of specialist and methodological training of an individual worker and a factor that integrates the teaching process and its overall effects on students, is also of great significance. In turn, good organisation of practical classes is based on proper and long-term cooperation between a higher education institution and the place of apprenticeship, which allows apprenticeship programmes to be further elaborated and this cooperation to be strengthened. Most of the entities surveyed negatively assess the organisation of apprenticeship programmes, mainly due to an insufficient number of hours of practical training, legislative requirements, and the failure to educate people with a view to specific job positions. All respondents think that the education system does not educate at a level that will be sufficient for a future professional career. Apart from the fact that, according to them, the apprenticeship programmes last too short, the schools also lack state-of-the-art equipment and a proper assignment of supervisors that would be able to properly distribute tasks between apprentices.

During the survey, the employers indicated a number of elements which should improve the quality of education, including training of teachers and hiring qualified teachers with practical professional experience as well as increasing the number of practical classes. 196

Technical courses of study which, according to the employers, should be supported and developed are as follows: electrician technician, specialist technician in tool calibration and measurement methods, car sprayers, mechanics. The most sought- after competencies of graduates include the following: specialist knowledge, well- developed interpersonal skills, and adaptive abilities. In addition, technological development defines new competencies that allow one to function in a society based on knowledge and information.

An important element of employment, which also affects the future of a given firm, is the recruitment of graduates. In looking for new employees, the manufacturers take into account their competencies, in particular knowledge of engineering drawing, knowledge on electronics and mechanics, ability to use tools, willingness to learn and quickness of learning, ability of teamwork. Furthermore, additional assets are as follows: a positive attitude to work, communicative skills, and creativity. The employers indicated the need to create a bidirectional community portal that would

gather together employers and people seeking employment in the automotive industry.

 Services enterprises An additional survey was conducted among representatives of employees as well as the owners of authorised dealerships and independent garages. 5% of them indicate staffing gaps, whereas as much as 23% state that they need to increase their personnel, but only in some vacancies. Employees for the following jobs are wanted, in particular: mechanics (43%), service staff and panel beaters (11% in each of these jobs), sprayers (7%), other specialisations (14%), including electrician, electronic engineer, electrical mechanic, electrical technician, vehicle diagnostic technician, seller, tyre technician, apprentice, locksmith, grinder, LPG fitter. The questionnaire surveys showed that the lowest demand was for managerial positions (2%). In the case of these enterprises, cooperation with vocational schools (only 6%) and employment fairs (1%) are the forms that are used least frequently to seek new employees. The following forms are used most often to seek personnel: recommendation by friends (33%), job advertisements in the press (24%) and in the Internet (19%). Only one in four of the respondents indicated that automotive education of a future employee was important. 197 41% of enterprises from the surveyed group cooperate on an ongoing basis with vocational schools (the degree of cooperation is higher in the case of manufacturing firms). Among the remaining part of these enterprises, 35% of those surveyed thought that they would be willing to enter into such cooperation, and 6% declared their willingness to undertake such cooperation in the next years. This result shows that the entrepreneurs can see a relation between the selection of personnel and success of their firm, and they are aware of this process. Among the entrepreneurs surveyed, 11% indicated that there was no interest on the part of the schools, and 9% indicated their bad experience with cooperation with vocational schools.

The firms that had entered into cooperation with vocational schools thought that the most important form of cooperation was on-the-job training, then to enable students to observe work, to enable schools to conduct practical classes at workplaces, and to accept school graduates for apprenticeship. On the other hand, the respondents indicated the lack of commitment on the part of the vocational schools to undertake cooperation with the employers in the area of labour market diagnosis. 78% of the surveyed firms claim that no school has ever requested them to specify their

expectations with respect to school graduates. But there is a similar problem in the opposite direction – only 2% of these firms approached the vocational schools to communicate their expectations. At the moment, apprenticeship is treated as an additional element of training of future employees, but not a permanent element of teaching programmes. 39% of the surveyed firms accept vocational school students for free apprenticeships, while 29% declared that they could organise paid apprenticeships. Unfortunately, only 20% of the respondents stated that apprenticeship programmes were worked out together with the vocational schools. 66% of the firms that accept students for on-the-job training prefer vocational school students, as the most committed ones, 32% prefer students of technical schools related to automotive professions and 2% students who completed vocational training programmes.

In seeking new employees, the services firms involved in the automotive industry primarily take into account their hard competencies, including knowledge and skills in using tools, knowledge of basics of mechanics and principles of operation of mechanical equipment, as well as soft competencies, including a positive attitude to the customer, personal culture, and logical thinking. In the opinion of 81% of the respondents, the education system does not meet their expectations. 198 According to the services firms, the process of education could be improved to the greatest extent by increasing the number of hours of practical classes, by eliminating programmes that teach unnecessary theoretical knowledge, and by teaching students communicative skills.

13.3.2 SWOT analysis of the Lower Silesian automotive industry On the basis of the existing findings and conclusions drawn from the earlier chapters and subchapters of this report, we can indicate strengths and weaknesses of the automotive sector in Lower Silesia as well as opportunities and threats that exist in connection with its future development (Table 16).

Table 16 SWOT analysis of the automotive industry in Lower Silesia Strengths Weaknesses  Car-making tradition in the region  No car assembly plant (Jelcz Automotive Plant Factory)  A lack of trained staff with  3 Special Economic Zones, including experience in the automotive industry the Wałbrzych Special Economic Zone  A lack of experience in the particularly oriented towards the establishment of clusters automotive industry  insignificant cross-border exchange  A large number of automotive of experience industry companies, including domestic  A large number of small businesses subsuppliers for the auto industry experiencing economic difficulties  High investment attractiveness of the  Too slow a pace of innovation in region enterprises  Higher education institutions,  The Regional Innovation System primarily the faculties of the Wrocław does not function efficiently University of Technology, as a source of  Insufficient knowledge of the region‘s skilled labour values among potential investors  Spatial conditions - European  Structural unemployment resulting in transport corridors running through shortages of skilled labour Lower Silesia  Large investments in technical infrastructure  Well-developed transport infrastructure 199 Opportunities Threats  Establishment of a car assembly  The neighbours from the Czech plant in the region Republic and Slovakia can attract  Further development of the Special investments – competition of enterprises Economic Zones in the neighbouring countries  Financial support for the border  The Special Economic Zones will regions from the EU aid funds operate only until 2017  Recovery in the Japanese economy  Emigration of highly skilled workforce – a prestigious investor may appear in to other EU countries the region  Insufficient budgetary allocations for  Easier entry into new markets in the the development of science neighbouring countries due to the proximity of their borders Source: Author‟s research based on: Kosiba J., Lasota S., Markiewicz- Patkowska J., Sebastian Z., Wągiel J., “Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia”, Lower Silesian Chamber of Commerce, and Mirosław Wróbel Sp. z o. o. Authorised Mercedes-Benz Dealer, Wrocław, 2010.

13.4 Means of stimulating and anchoring investment in the automotive sector in Lower Silesia

A relatively well-developed system of investment incentives and forms of business support are in place in Poland and they also cover the automotive sector. The main assistance is provided from the central level, among others through the activities of the Polish Information and Foreign Investment Agency (PAIiIZ) or government grants, whereas assistance from the regional and local level is provided through the activities of the Regional Investor Assistance Centres, Special Economic Zones (SEZs), or a system of tax exemptions.

 The Polish Information and Foreign Investment Agency Government assistance is provided to foreign entities, including representatives of the automotive industry interested in entering the Polish market, primarily by the Polish Information and Foreign Investment Agency (PAIiIZ) whose main aim is to increase the inflow of Foreign Direct Investment (FDI) to Poland (Figure 9). PAIiIZ provides free direct assistance services during the investment process, information services on the regulatory and economic environment, support in selecting a location for an investment project and in the organisation of visits as well as it assists in the identification of suppliers and facilitates contacts with central and local authorities.

200 Figure 9 Investment assistance of the Polish Information and Foreign Investment Agency

INVESTMENT PROCESS PAIiIZ‟s OFFER

Marketing campaigns, investment seminars, workshops, study tours Consideration of investment Cooperation with Polish embassies

Assistance from project managers Site visits Long list of countries Macroeconomic information, sectoral information on investment incentives, SEZs and European funds Assistance in obtaining government funding Cooperation with SEZs Short list Databases of potential subsuppliers, business partners, and investment land

Investment support Investment decision Ombudsman for foreign investors

Source: Authors‟ research based on data from the Polish Information and Foreign Investment Agency (PAIiIZ).

The Polish Information and Foreign Investment Agency guides investors and firms that conduct business in Poland through all necessary administrative and legal procedures during the implementation of projects; it also provides access to the information base on the economic and regulatory environment for an investment as well as access to appropriate partners, suppliers, and locations for an investment.

In order to provide the best possible assistance to foreign investors, PAIiIZ has set up, within its structure, a national network of Regional Investor Assistance Centres that offer support at the regional level, including by providing access to information on the latest investment offers and to regional microeconomic data. The task of these Centres is to facilitate contacts between the investor and local authorities. Moreover, PAIiIZ also performs the role of the OECD National Contact Point.

According to the 2009 data, PAIiIZ issued a positive investment decision for 36 investment projects supported by this Agency, with a total value of nearly €900 million and planned employment of more than 9,700 people. These projects included two from the automotive sector; their total investment value was €227 million and they planned to create 450 jobs. The most important project in the automotive sector was an investment of the company Fiat Powertrain in Bielsko Biała (investment value 201 €164 million, employment 400 people).

 Investment incentives in the SEZs The Special Economic Zone (SEZ) is an administratively designated part of Polish territory within which economic activity can be conducted on preferential terms. The SEZs were established to accelerate the economic development of Polish regions, to increase the competitiveness of products and services, to make productive use of some post-industrial assets, and to create new jobs. In the SEZ, an entrepreneur can obtain the following privileges:  Tax exemption (CIT or PIT);  A site fully prepared for development at a competitive price;  Free assistance in handling formalities connected with the investment project;  Exemption from property tax (in some municipalities (gminas)).

Permits to conduct business in the SEZ are issued by the Management Board of each of the zones. The Board also assists in the investment process by, for example,

facilitating contacts with the local authorities or central administration in matters related to, inter alia, the purchase of investment land. The possible amount of regional aid that an entrepreneur may apply for is dependent on, among others, investment location, investment value or costs of employment of new workers as well as on the size of the enterprise applying for tax exemption. As of 1 January 2007, a new Regional Aid Map for 2007 – 2013 is applicable in Poland (Figure 10). This map shows the ceilings of regional public aid in particular voivodeships (regions), that is, the percentage share of public aid in costs eligible for such aid.

Figure 10 Regional Aid Map for 2007 – 2013

202

Source: Data of the Polish Information and Foreign Investment Agency.

 Industrial and Technology Parks Industrial and technology parks are development-oriented solutions that are used more and more frequently in our country; they address their offer both to Polish and foreign entrepreneurs. Technology parks, created to facilitate the flow of knowledge and technology between academic institutions and enterprises, offer consultancy services in setting up and development of enterprises, assistance in technology transfer, application of results of academic studies and R&D work in technological innovations, and in the creation of conditions conducive for business. In turn, an industrial and technology park is a cluster of designated properties, together with the existing infrastructure left after restructured or liquidated enterprises, created to

provide preferential conditions for business activities, in particular for small and medium-sized enterprises. The aim of the activities of industrial and technology parks is to offer space for business activities and to attract investors and market-efficient firms using modern technologies which would create new jobs.

 Government grant Entrepreneurs who implement new investment projects in Poland can count on support (a grant) under the ―Programme to support investments of high importance to the Polish economy for 2011-2020‖ adopted by the Council of Ministers in July 2011. Public aid offered under the Programme complies with the EU state aid rules27. Only entrepreneurs who plan to invest in the following sectors: automotive, electronics, aviation, modern services, or research and development, can apply for this type of support. Under this Programme, support for investments can be granted in the following two categories:

a. Support in respect of job creation costs (employment grant): As regards the automotive sector, the following investment criteria are applicable: new jobs (min. 250) and eligible costs of the new investment (min. PLN 40 million). Amount of aid – from PLN 3,200 to 15,600 PLN (from ca. €800 to €3,900). 203

b. Support in respect of eligible costs of the new investment (investment grant): As regards the automotive sector, the following investment criteria are applicable: new jobs (min. 50) and eligible costs of the new investment (min. PLN 160 million). Amount of aid – 2-10.5% of eligible costs.

Under this system, support is provided only to investment projects whose implementation in Poland is conditional upon receiving a financial grant from the State budget. The Minister of Economy is both the operator of the system and the authority that awards aid, while the Polish Information and Foreign Investment Agency (PAIiIZ) is responsible for preparing investment projects and presenting them to the Interministerial Committee for Foreign Investment as well as for the preparation of documents necessary to carry out the whole process of granting financial support.

27 This complies with the Guidelines on National Regional Aid for 2007-2013 (OJ No C 54 of 4 March 2006) and with the Commission Regulation (EC) No. 800/2000 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General Block Exemption Regulation) (OJ L 214, 09.08.2008, p. 3).

 Exemption from property tax – investment incentives in municipalities One of the forms of investment aid to entrepreneurs which is offered by municipalities (gminas) is exemption from local taxes and levies, including exemption from property tax. This is governed by the Act of 12 January 1991 on local taxes and levies, under which the Municipality Council (Rada Gminy) has the powers to set tax rates and to adopt exemptions on taxes and levies provided for in this law. By way of a resolution, the Municipality Council may adopt a tax exemption from property tax for entrepreneurs as one of the forms of public aid. Most frequently, the Municipality Councils establish tax exemptions on the basis of the relevant Regulation of the Council of Ministers which provides for a national aid programme as well as in accordance with the de minimis aid rule. The amount of aid granted may be calculated in relation to costs of investment in fixed assets and intangible assets that are related to the implementation of a new investment project or in relation costs of job creation associated with the implementation of a new investment project.

The Municipality Council may establish, by way of a resolution providing for an aid programme, tax exemptions by applying solutions that comply with the Community rules on de minimis aid. The basic legislation that governs the granting of de minimis aid is the Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the 204 application of Articles 87 and 88 of the Treaty to de minimis aid (OJ L.06.379.5) and this Regulation makes it possible to grant aid also in the road transport sector. The Regulation sets the de minimis aid ceiling at €200,000 and €100,000 in the road transport sector over a period of three budgetary years per business entity.

 Research and Development Centres The amended Act of 30 May 2008 on some forms of support for innovative activities creates a possibility of awarding the status of Research and Development Centre to an enterprise. The benefits arising from having the status of R&D Centre include, among others, exemptions from property tax and a reduction in taxable income by the amount allocated to the innovation fund and, in keeping with the de minimis aid rule, exemptions from property tax as well as agricultural and forestry tax. In addition, R&D Centres can deduct the amount allocated to the innovation fund from their taxable income. One of the criteria for entities that apply for the R&D Centre status is the requirement to generate net revenue from the sale of goods and products and from financial operations for the previous financial year at an amount of at least €1.2

million in accordance with the rules provided for in the Accounting Act, including 20% of net revenue from the sale of R&D services.

 The Main Council of Research Institutes The task of this Council is, among others, to represent the research institutions in contacts with central and local government authorities as well as with business organisations, to cooperate with governmental and non-governmental bodies implementing scientific and technological policy and, in addition, to identify common problems of the research institutes and to take public action aimed at solving these problems.

The above-mentioned investment support instruments are also used in Lower Silesia. We should mention here, in the first place, the activities of the four Special Economic Zones where automotive sector companies conduct business (Figure 11). The SEZs are understood as an administratively designated part of the country‘s territory allocated for business activities conducted on preferential terms. The SEZs were created primarily to attract capital, in particular foreign capital, in order to stimulate selected economic areas. There are four Special Economic Zones within the area of Lower Silesia. These are the following:  Wałbrzych SEZ "INVEST - PARK" (40 subzones, including 24 located in Lower 205 Silesia);  Kamienna Góra SEZ for Small Business (currently, 13 subzones in Lower Silesia);  Legnica SEZ (13 subzones operating in Lower Silesia);  Kobierzyce Subzone of Tarnobrzeg SEZ.

Figure 11 Spatial distribution of Special Economic Zones, technology and industrial parks, technology and business incubators as well as technology transfer centres in Lower Silesia

206

Source: Zaleski J., Lisowiec G., Korf T., “The Regional Report of Lower Silesian Voivodeship”, Wrocław, April 2011.

The activities of the Special Economic Zones in Lower Silesia promote the formation of automotive clusters, which are concentrations of large automotive industry companies, in the area of, among others, Wałbrzych or Wrocław (Figure 8). The location of investments of large auto corporations is a unique investment incentive for other companies from this sector which do not operate in Lower Silesia, by providing clear evidence in the form of dynamically developing business of the firms present in this region. This is a kind of reinforcement of the institutional activities of the public authorities.

Furthermore, nine technology and industrial parks operate within the area of Lower Silesia, in which automotive companies conduct business activities (see Chapter 1). Assistance to enterprises is also provided by the well-developed business support sector, in the form of numerous financial support institutions (including bank branches or loan and guarantee

funds), insurance institutions, advisory and consulting firms, centres for stakeholder assistance. As far as investment support is concerned, the regional development agencies (including the Wrocław Regional Development Agency), the Investor Assistance Centres, and the Wrocław Agglomeration Development Agency are of special importance in this respect. The activities of these institutions are focused mainly on the following areas: to seek locations for investments, to provide assistance in contacts with central and local government administration, to prepare the investment process and provide support during this process, to provide full construction management services during the implementation of an investment project, to seek business and trade partners as well as subcontractors, to conduct negotiation and mediation as well as to give advice on current business operations.

The factors that counteract the relocation of investments in the automotive sector (which is marked by a relatively high level of labour-intensity) from Lower Silesia to the EU countries characterised by relatively lower labour costs, such as Bulgaria and Romania, or to non-EU countries (e.g. Ukraine), are as follows: higher labour productivity, EU membership (in the context of trade barriers on the external borders of the EU), a high level of support from EU funds, and one of the most investor-friendly climates (section 3.2.1.). It should also be mentioned that in the event of the lack of specific institutional measures in relation to the enterprises already operating in Lower Silesia (assuming that the SEZs will be liquidated in 2020), with the simultaneous equalisation of labour costs relative to the wealthier EU 207 countries, in the medium term there can be a risk that business operations will be transferred outside Poland.

14.0 Conclusions  In spite of its high position of GDP per capita in PPS among the Polish regions, Lower Silesia‘s position is unfavourable compared to the regions of Western Europe (Saxony – Anhalt and West Midlands), which results from the long way that the Polish regions have still to go to achieve real convergence with the EU-27 average.

 Nine technology and industrial parks operate in Lower Silesia. In the case of all the parks, the percentage of use of office space ranges 88-100%. In addition, some of the parks have investment-grade land in their offers. Apart from the Wrocław Technology Park (100% of developed land), the percentage of use of investment plots is in the range of 0-9%.

 The main factors that attract tenants to the parks are: an attractive price for rental of land or property, possibility to cooperate with other tenants of the park, a good location as well as access to laboratories and a favourable consultancy offer.

 The largest number of spin-off companies conduct their business activities in the Wrocław Technology Park. Likewise, the highest number of start-ups, i.e. academic 208 businesses operating in the incubators, and the highest number of enterprises conducting their own research and development activities are based in the Wrocław Technology Park.

 Rental of production, warehouse and office space is the most frequently offered service of the technology parks, followed by organisation and conduct of different types of training which mostly relates to financing of innovation and knowledge transfer, intellectual property rights, industrial property protection, industrial design and ISO certification as well as financial support.

 The revenue structure of the parks operating in Lower Silesia varies and these institutions can be divided into two groups: (1) the sources of revenue include primarily EU funds or grants from other international organisations, or revenue from other activities (e.g. sale of land, interest on capital), (2) the main revenue comes from land and office space rental.

 In most cases, the local government authorities, enterprises, financing institutions and governmental institutions as well as higher education institutions, chambers of commerce, regional development agencies, and associations are partners of the technology and industrial parks.

 Using the website as an administration, multilingual communication, promotion and implementation tool makes the collaboration among innovative SMEs, including ones operating in technology parks, more intense and easier as well as the project management more effective. Furthermore, it can be used an instrument to intensify collaboration among manufacturers, including ones operating in technology parks, in different regions in the field of research and development.

 Transferring of know-how through study-visits and staff exchanges can improve the competitions and other activities aimed at supporting the development of entrepreneurship in technology parks.

 The Investor Assistance Centre is one of examples of good practices in comprehensive support to foreign firms in the investment process, among others through the promotion of technology parks. 209

 Training, consulting and financial support activities can contribute significantly to the increase in the number of companies operating in technology parks, and thus result in better exploitation of the potential of these units.

 Conclusions from the SWOT analysis (Table 16).  Relatively cheap and well educated labour force contributed to an increase in the volume of foreign direct investment, including, among others, in the automotive sectors in the Lower Silesia.

 The current links between RIS elements are weak and need to be improved.

 In recent years in several Central and Eastern Europe countries, such as Poland, Slovakia, Czech Republic, and Hungary, many foreign car manufacturers, such as Ford, Toyota, Kia, Porsche, Peugeot, Volkswagen, Fiat, have opened their assembly lines and factories manufacturing automotive

components, thus creating a new automotive cluster at the European level which is now at the stage of growth. The automotive industry at the national level is primarily concentrated around the four largest agglomerations: Warsaw, Wrocław, Katowice, and Poznań.

 Poland is one of the largest car producers in the region of Central and Eastern Europe (out of the 40 car factories, 16 are located in Poland).

 The Polish car industry is based primarily on foreign investment. All the large plants producing cars and car parts (excluding the company Solaris) are foreign companies. The high share of foreign direct investment in the auto industry forms the basis for the dynamic development of the pool of Polish subsuppliers. Poland has now become a leading producer of car components in Central and Eastern Europe.

 The advantage of the Polish automotive industry is its large and relatively well- skilled labour force. Labour costs in Poland are relatively low and they are about a third of labour costs in Germany or France.

 Industry-specific concentration of enterprises in Lower Silesia correlates with 210 their spatial concentration in selected examples, which also takes place in the case of the automotive industry. The firms from this industry form an informal cluster that comprises enterprises such as Toyota, Volvo, Volkswagen, Bosch, Faurecia, WABCO and many other subsuppliers of these companies.

 A characteristic feature of the automotive industry in Lower Silesia is the production of automotive subassemblies and components, and not complete motor vehicles. Most of these companies are branches of multinational automotive corporations (e.g. Volkswagen, Toyota), operating as part of their international supply – chains. Hence, a major part of production from Lower Silesia is export-oriented.

 An increasingly stronger asset of this region is the local base of suppliers of car components (often with a high level of technological advancement) who manufacture their products for the branches of the multinationals located in the region. This supplier base is a local element of the main supply chain for automotive components.

 Foreign investments located in the region are the driving force for the Lower Silesian automotive sector. The regions of high investment attractiveness, characterised by the most optimal combination of location factors creating the best conditions for business activities of enterprises, include Lower Silesia (ranking second after Silesia) which, as one of the most attractive regions for investment in the country, is distinguished primarily by the high ratings of its activity designed to support investors, transport availability as well as the level of economic and social infrastructure.

 The analysis of the value of the Balassa index shows the relatively high importance of the automotive industry for the economic development of Lower Silesia (this value is distinctly higher than one). Nevertheless, it should be noted that there is an ongoing reduction in the role of this area of business activity in the total value of industrial output in Lower Silesia compared to Poland as a whole. This indicates higher diversification of the sector II structure, largely attributable to the location of many branches of multinational companies involved in the electronics (among others, LG) or electrical machinery industries (among others, Alstom) in the region under consideration. 211  It should be noted that there was a relatively stronger slow-down in the increase of the Lower Silesian automotive industry during the period of the global economic crisis (2008-2009) than in the case of the national average and total manufacturing output in this region. This indicates a relatively high level of internationalisation of this manufacturing sector in the region in question, whose production is exported in a major part within the international value added chain. Therefore, an economic downturn in the global markets has an effect on the volume of products manufactured in the region.

 In the case of production in the automotive sector in Lower Silesia, a clear dominance of large economic entities (more than 1000 employees) can be seen. This confirms the fact that large firms established as a result of FDI inflows from multinationals such as, e.g., Volkswagen, Volvo, or Toyota play an extremely important role in the development of the sector under study in Lower Silesia.

 Investments in Lower Silesia accounted for, on average, 25% of annual capital expenditure invested in the automotive sector in Poland. This should be treated as a good signal for the further development of the sector under consideration in Lower Silesia which indicates the strong determination of enterprises to strengthen their competitive position at the global scale.

 In terms of the number of people employed in the automotive industry, Lower Silesia ranks second (after Silesia).

 Manufacturing enterprises in the auto industry indicate the need to increase employment within the next several years, in particular in jobs such as production operator, production technologist, and mechanic.

 In seeking new employees, for manufacturing enterprises it is much more important whether a particular person has appropriate vocational skills and experience than whether he has education in a given area. In the process of training specialists and professionals, for whom there is a great demand in the auto industry, it is necessary to engage employers in the process of developing employee teaching and training programmes. 212  Technical courses of study which, according to the employers, should be supported and developed are as follows: electrician technician, specialist technician in tool calibration and measurement methods, car sprayers, mechanics. The most sought-after competencies of graduates include the following: specialist knowledge, well-developed interpersonal skills, and adaptive abilities. In addition, technological development defines new competencies that allow one to function in a society based on knowledge and information.

 A relatively well-developed system of investment incentives and forms of business support are in place in Poland and they also cover the automotive sector. The main assistance is provided from the central level, among others through the activities of the Polish Information and Foreign Investment Agency (PAIiIZ) or government grants, whereas assistance from the regional and local level is provided through the activities of the Regional Investor Assistance Centres, Special Economic Zones, or a system of tax exemptions.

 The factors that counteract the relocation of investments in the automotive sector (which is marked by a relatively high level of labour-intensity) from Lower Silesia to the EU countries characterised by relatively lower labour costs, such as Bulgaria and Romania, or to non-EU countries (e.g. Ukraine), are as follows: higher labour productivity, EU membership (in the context of trade barriers on the external borders of the EU), a high level of support from EU funds, and one of the most investor-friendly climates.

 In the event of the lack of specific institutional measures in relation to the enterprises already operating in Lower Silesia (assuming that the SEZs will be liquidated in 2020), with the simultaneous equalisation of labour costs relative to the wealthier EU countries, in the medium term there can be a risk that business operations will be transferred outside Poland.

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15.0 Bibliography

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Frost & Sullivan, Polish Information and Foreign Investment Agency, „White paper – Clusters, Technology Parks and Incubators in Poland‖, October 2008.

Kosiba J., Lasota S., Markiewicz- Patkowska J., Sebastian Z., Wągiel J., ―Diagnosis of educational needs in the area of vocational education in the automotive industry in Lower Silesia‖, Lower Silesian Chamber of Commerce, and Mirosław Wróbel Sp. z o. o. Authorised Mercedes-Benz Dealer, Wrocław, 2010.

Kwieciński L., Stawicka M., Wróblewski M., ―Analysis of regional investment attractiveness in the light of modern trends‖. prepared under the project ―Analysis, research, and forecasts for the Lower Silesian Voivodeship Strategy‖, December 2010. 214

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Marshal‘s Office of Lower Silesian Voivodeship, ―Business Support Institutions in Lower Silesia – A Guide‖, Wrocław, 2010.

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Marshal‘s Office of Lower Silesian Voivodeship ―Spatial Development Plan for Lower Silesian Voivodeship‖, 2002

Polish Automotive Industry Association, ―Report on the automotive industry, 2011‖, KPMG, Baker & McKenzie, Warsaw 2011.

Polish Automotive Industry Association, ―Report on the automotive industry, 2010‖, KPMG, Baker & McKenzie, Warsaw 2010.

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Zaleski J., Lisowiec G., Korf T., ―The Regional Report of Lower Silesian Voivodeship‖, Wrocław, April 2011.

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